FDI drops 12pc in July-October as inflows from China decline

KARACHI: Pakistan’s foreign direct investment dropped 12 percent in the first four months of this fiscal year, the central bank data showed on Wednesday, mostly due to decline in the Chinese inflows.

The country drew in $662 million of foreign direct investment (FDI) in July-October FY2022, compared with $750 million in the corresponding period of last fiscal year.

In October, the FDI fell 24 percent year-on-year to $223 million from $236 million.

The decrease in the FDI flows is mainly driven by lower Chinese investments in the country, under the China-Pakistan Economic Corridor (CPEC) related projects.

Lower investments in the power sector under the CPEC continued to weigh on FDI in the country.

The data issued by the State Bank of Pakistan showed that net FDI from China fell to $116 million in July-October from $399 million a year ago. However, non-Chinese inflows maintained an upward trend during the period under review.

The country's power sector lost momentum as it saw FDI decline to $173 million in July-October FY2022, compared with $467 million in the same period last year. In July, the FDI in the power sector declined to

$8.6 million against $46.5 million recorded in the corresponding month of last year.

Foreign companies invested $81.6 million in the oil and gas explorations sector. Similar investments stood at $81.2 million during the last year.

However, inflows in the financial businesses rose to $114 million from $106 million.

Telecommunications sector witnessed an inflow of $23 million in July-October FY2022 against the outflows of $19 million last year.

Analysts said the outlook for the FDI would depend on the resumption of the International Monetary Fund (IMF) Programme, which could improve the global investor confidence in the country’s economy and the full implementation of the second phase of the CPEC.

The aim of the CPEC’s phase-II is to enhance bilateral cooperation in industrial, technological and agricultural sectors. The government has recently revealed that four out of the nine agreed on special economic zones (SEZs) along with Gwadar Free Zone under the auspices of CPEC, were now at an advanced stage of development.

The country had attracted sizable investments in the energy and infrastructure sectors under the CPEC, as part of China’s Belt Road Initiative. Global economic growth and the foreign firms’ investment strategies in the different countries, including Pakistan would also determine the future of direct investment flows to Pakistan.