Foreign Direct Investment (FDI) upsurges 6pc in 8 months

According to the SBP data, the Country’s foreign direct investment (FDI) increased 6 percent to $1.257 billion in eight months of this fiscal year. In February, the FDI fell 34 percent to $91 million. It had stood at $137 million in the same month of last fiscal year. China remained the largest investor with net direct investment of $385 million in July-February FY2022. In addition, the biggest source of foreign investment in the country is CPEC as most of the projects under the first phase of CPEC have completed, pushing a need to start the second phase of the programme soon to attract FDI from China.

Foreign direct investment (FDI) fell year-on-year (YoY) by 33 per cent and declined by 17.3pc compared to preceding month of January, data released by the State Bank of Pakistan showed on Thursday.

According to the SBP data, FDI inflows during July-Feb 2021-22 (8MFY22) noted a positive growth of 6pc compared to the same period of last fiscal year. The second half of the current fiscal has been facing several negative impacts including the war in Ukraine and a hike in oil prices in the international markets.

The record increase in oil prices as well as in other commodities rates has widened the trade deficit. The 6pc FDI growth is far lower than the $11.6 billion current account deficit confronting the country.

Poor investment climate hit the FDI inflows which noted a sharp decline of 50pc to $110 million in January this year from $218.7m in December 2021.

Real change was noted in January since the first half of the current fiscal year (1HFY22) witnessed a growth of 20pc in FDI. The inflow in December 2021 was much higher at $218.7m – showing a jump of 29pc – compared to $169.4m in December 2020.

The declining trend of last two months could eliminate the positive growth trend of 20pc growth during 1HFY22.

Though exports showed growth of 25pc but the amount is still not enough to mitigate the impact of the huge import bill. The only positive news was the inflow of remittances which kept its pace of growth during 8MFY22.

The SBP data showed FDI inflow in February this year was $90.8m compared to $137m during the same month in FY21; a decline of 33.6pc.

During 8MFY22, the country received a total $1.257bn compared to $1.185bn in the same period of FY21, showing an increase of 6.1pc.

Portfolio investment during July-Feb FY22 showed that the outflow was higher at $314m compared to an outflow of $253m in 8MFY21.

Country-to-country inflows also reflected the changing situation on external fronts of the economy. The FDI inflows from China dropped to $384.5m during July-Feb FY22 compared to $522.7m in 8MFY21.

China has been the biggest investor in the country. It still retained its first position in the list of the countries investing in Pakistan.

Despite good relations with China, Pakistan is unable to attract Chinese investors for any vital change in the economy. China is the biggest trade partner of the country but the balance is largely in favour of China.

Inflows from Hong Kong were up by $25m from a year ago to $130m in 8MFY22.

The biggest change was noted in the inflows from United States which more than doubled in 8MFY22 to $175m compared to $84.2m in the same period in FY21.

Other important investors included United Arab Emirates with $78m, Switzerland $80.4m and Singapore with $79m.