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FDI more than doubles to $2.3bln in July-April

Business

May 19, 2020

KARACHI: Foreign direct investment (FDI) in Pakistan more than doubled to $2.3 billion in the first 10 months of the current fiscal year of 2019/20, with the country’s power and communications sectors remaining main attraction for overseas investors, the central bank’s data showed on Monday.

In July-April, FDI surged around 127 percent from $1 billion in the corresponding period a year earlier, according to the State Bank of Pakistan (SBP).

A large part of the FDI went into the power generation projects, while communications sector also attracted significant portion of direct investment during the period under review.

Net FDI in the power sector stood at $775.8 million in July-April FY2020 as against the outflows of $341.2 million in the corresponding period a year ago. Power sector continued to attract investment due to ongoing first phase of China-Pakistan Economic Corridor projects, which so far injected 10,000 megawatts of electricity into the grid.

Likewise, communications sector fetched $510.3 million in foreign direct investment in 10 months of the current fiscal year, compared with outflows of $144.4 million in the same period last year.

China remained the largest investor in Pakistan as its firms invested $877.8 million in the electricity generation projects and telecommunications in July-April FY2020. That compared with $45.4 million last year.

In April, foreign direct investment rose to $133.2 million from $100.8 million in the same month a year earlier. Total foreign investment witnessed an outflow of $511.5 million in April, compared with the outflow of $897.6 million in the same month of FY2019.

The FDI continued to see an upward trend in the recent past mainly due to Chinese-funded projects. The inflows couldn’t be broken down into debt and equity.

The inflows are likely to dry up in the coming months due to economic downturn in the United States, United Kingdom and the Middle East countries caused by coronavirus-related lockdowns and disruptions.

Many global businesses are cash-strapped and facing recession challenges. They seem to be reluctant to make fresh investment in overseas markets.

The SBP data showed that foreign portfolio investment in equity market saw an outflow of $182.7 million in 10 months, compared with $408.1 million a year earlier.

Foreign funds managers pulled $234.5 million from the local currency government securities as they preferred safe assets in the wake of COVID-19 crisis.

The massive cut in interest rates in two months by the central bank also compelled foreign portfolio investors to divest money from the fixed income instruments.

In July-April, total foreign investment stood at $1.9 billion, compared with an outflow of $402.7 million in the corresponding period a year earlier.