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January 17, 2020

FDI surges 68.3 percent to $1.34 billion in July-December

Business

January 17, 2020

KARACHI: Foreign direct investment (FDI) surged 68.3 percent to $1.340 billion in the first six months of this fiscal year (2019/20), on Chinese and telecom sector inflows, State Bank of Pakistan (SBP) data showed on Thursday.

The FDI inflows stood at $796.8 million in the corresponding period last year, while in December 2019, it rose 52.42 percent to $487.0 million.

The increase in the FDI was driven by higher Chinese inflows.

The Chinese firms invested $422.5 million in Pakistan in July-December FY20, compared to $217.1 million in the same period last year.

Large inflows in the communications sector also contributed to the rise in the FDI in first half of this fiscal as two mobile firms paid licence renewal fees, while an international online payment company invested in infrastructure in the period under review.

The communications sector attracted the highest FDI at $432 million in the six months, compared with an outflow of $126.3 million in the corresponding period last year.

Moreover, a major improvement was seen in power sector that received $289.7 million in July-December FY20 against an outflow of $329.5 million last year.

Analysts said global investor sentiment lifted following the implementation of the economic reforms supported by the International Monetary Fund’s (IMF) loan programme, accelerating growth in the FDI.

Moreover, the government has taken several measures to create a business-friendly environment that have contributed to an improvement in the country’s ranking in the World Bank’s latest Ease of Doing Business 2020 report.

The SBP’s data also showed that foreign portfolio investment in the stock market stood at $18.8 million in the period under review, while the market had seen outflows of $419.8 million last year.

Foreign investment in government securities such as Market Treasury Bills and Pakistan Investment Bonds reached $452.2 million, compared with $0.1 million a year ago.

After a gap of almost two years, foreign portfolio investment witnessed a reversal of trend.

The central bank in first quarterly report said this increase in portfolio flows could be attributed to investors’ confidence about the sustainability of the market-based exchange rate system, continued improvement in Pakistan’s reserves buffers, and the comfort provided by the initiation of the IMF’s Extended Fund Facility programme.

“It is also important to note that while the interest rate differential had been higher in the past as well, Pakistan’s debt market was unable to attract significant interest from foreign investors,” it said.