FDI drops 17pc to $717.1mln in July-November

KARACHI: Pakistan’s foreign direct investment (FDI) dropped 17 percent to $717.1 million in the first five months of the current fiscal year, data from the State Bank of Pakistan (SBP) showed on Wednesday.

The country attracted $864.4 million of FDI in the corresponding period of the last fiscal year.

FDI flows turned negative in November due to pull out of investments from China and Norway from the country.

Pakistan registered FDI outflow of $16 million in November. However, FDI stood at $192.4 million in November 2019, the SBP data showed. China pulled out $218.6 million followed by Norway with $55.8 million outflows from the country in the month under review.

The SBP’s data, however, showed that net FDI flows from China rose to $253.9 million in July-November FY2021 from $76.5 million a year earlier. Inflows sourced from Malta remained flat at $92.6 million in five months of this fiscal year, while net FDI from Netherlands increased to $87.6 million from $31 million.

The country saw an outflow of $26.6 million from the Norwegian firms in July-November FY2021 against inflow of $318.5 million in the same period last year.

Power sector remained the major recipient of the inflows, as FDI in this sector rose to $269.2 million in July-November FY2021 from $66.6 million a year ago. The upturn activity in the CPEC-related projects led to inflows in the power sector.

Telecommunications sector attracted $11.4 million FDI in the five months of FY2021, compared with a hefty $333.2 million last year. A one-off payment from multinational cellular companies for renewal of their operating licenses in Pakistan led to increased inflows in telecommunications in FY2020. FDI in financial businesses fell to $134.5 million from $136.8 million.

Analysts said the country’s prospects of FDI remained uncertain, and depended upon the pace of the global economic recovery. The world economy has badly been hit by widespread lockdowns imposed by the governments amid the risk of Covid-19 spread, which slowed down worldwide FDI flows.

As per the UNCTAD (2020), the announcements in new greenfield investment projects and cross-border mergers and acquisitions fell globally by more than 50 percent in the initial months of 2020 from last year.

Besides, new investments in infrastructure projects declined by more than 40 percent. Moreover, as reinvested earnings account for more than 50 percent of the total global FDI flows, earnings expectations and thus its reinvestment for 2020 between February and May for the majority of the top 5,000 multinational enterprises (MNEs) across the world were revised downward by more than 35 percent. The SBP’s figures revealed that outflow from the stock market stood at $185.5 million in July-November FY2021 as against the inflows of $19.5 million a year earlier.

Foreigners sold the government securities such as treasury bills and Pakistan Investment Bonds worth $142.3 million in July-November The country saw an aggressive buying of $1.136 billion in the corresponding period last year. Total foreign investment fell 80.7 percent to $389.3 million.