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September 18, 2020

FDI climbs 40pc to $226.7mln in July-Aug

Business

September 18, 2020

KARACHI: Foreign direct investment (FDI) in Pakistan jumped 40 percent to $226.7 million in the first two months of the current fiscal year of 2020/21 as overseas investors are encouragingly betting on economic recovery from the five-month of downturn, analyst said on Thursday.

The State Bank of Pakistan’s (SBP) data showed that FDI climbed from $162 million in the corresponding period of the last fiscal year. Majority of new investments were seen in financial businesses, electrical machinery and oil and gas exploration sectors, according to the data.

In August, FDI totaled $112.3 million, depicting 24 percent growth from the corresponding month of FY2020.

Analysts said the persistent upward trend in foreign direct investment showed that overseas investors are optimistic about the economic recovery in Pakistan.

Business activity is rebounding after the government lifted coronavirus lockdown in August. Various sectors of the economy such as the construction, energy and the manufacturing are showing signs of recovery.

A breakdown of the data revealed that FDI in financial sector sharply rose to $85.4 million in July-August FY2021. That was compared with $14 million a year earlier. FDI in the electrical machinery increased to $36.5 million from $15 million. The oil and gas exploration sector attracted $34.3 million of FDI in two months of the current fiscal year as opposed to $25.1 million in the same period last year.

Norway was the largest investor in Pakistan followed by Netherlands and Malta, according to the SBP’s data.

In July-August, investment from Norway rose to $45 million from $0.1 million a year ago. Investment from the Netherlands stood at $39.6 million compared with $3.7 million last year. The country fetched $30 million from Malta in the first two months of the current fiscal year.

Foreign funds managers invested $59.8 million in the government securities such as treasury bills and Pakistan Investment Bonds in July-August compared with $71 million a year ago.

The SBP data further showed that outflows from the stock market stood at $76.3 million in July-August as against inflow of $36.3 million in the same period of last fiscal year.

Total foreign investment fell 21.9 percent to $210.2 million during the period under review.

Foreign inflows are the lifeline of Pakistan’s economy struggling to improve its balance of payment position and pay import bills with imports almost triple than exports.

The government is dependent on foreign debts to reduce its current account deficit. Current account swung into surplus of $424 million in July compared with deficits of $100 million in June and $613 million in July last year. Remittances and FDI are two productive sources for the economic growth, according to the analysts.