KARACHI: Pakistan’s foreign direct investment (FDI) declined 26.1 percent to $169.5 million in the first two months of this fiscal year, the central bank’s data showed on Thursday.
Lower FDI inflows in July-August are considered an unfavourable sign for the economy, which is struggling with dwindling foreign exchange reserves and slowing economic activity.
The financial sector attracted $51 million in FDI from global investors in July-August FY2023, which was 11 percent lower when compared with $57 million in the same month of last fiscal year, according to figures from the State Bank of Pakistan.
Direct investment in the communications sector fell 54 percent to $25 billion. The investment in the gas and exploration sector dropped 81 percent to $6 million.
Pakistan fetched $8 million in FDI in July-August FY2023, compared with $13 million in the corresponding period of last year. However, the investment in the power sector rose 46 percent to $80.4 million.
The decline in the FDI flows is driven by weak investments from China. The country brought in $32.7 million worth of direct investments from China in July-August FY2023. These inflows stood at $47.5 million a year earlier.
However, investment flows from the UAE increased to $25.5 million from $10.6 million, and investment by Swiss firms rose to $23.3 million from $22.5 million.
The SBP’s data also showed that net FDI settled at $111 million in August, up 88 percent from a month ago.
However, the country saw FDI inflows fall 12 percent year-on-year in August. The country attracted $126 million in August 2021.
Pakistan’s government is committed to continuing to implement several comprehensive structural reforms to attract investment and support growth and job creation, according to a memorandum of economic and financial policies (MEFP) attached with the IMF’s country report on Pakistan published earlier this month.
The government is advancing privatisation and state-owned enterprises’ support.
“We are working toward debt recapitalisation and refinancing of two RLNG power plants. After the resolution of inter-ministerial issues, the process is expected to be completed by end-2022. Thereafter, the process of equity sale of the two RLNG power plants will be initiated afresh, with proceeds to be channelled to debt reduction and poverty programmes,” the government told the IMF.
“The government is implementing the approved national tariff policy. This will be based on time-bound strategic, infant, and greenfield industry protection. In line with our revenue mobilisation strategy, we will rationalise tariffs to boost competitiveness for ‘Made in Pakistan’ products, including phasing out tariffs on capital goods, intermediate products, and raw materials,” it said.
“Taking steps to improve the business environment. In particular, we will: simplify procedures to start a business and eliminate other unnecessary regulations, including the introduction of a single portal for all company registration and digital integration of federal and provincial entities involved in starting a business; streamline the approval process for foreign direct investment (FDI); and improve trading across borders by reducing customs-related processing time and reducing hours to prepare import/export documentation,” it added.
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