KARACHI: According to a State Bank data released on Wednesday, foreign direct investment (FDI) increased by 16 percent year over year to $131.2 million in February.
The improvement in February inflows was also a welcome diversion from the dreadful circumstances of January, when there was a $173 million net outflow.
The overall trend for the fiscal year is still concerning, though, with FDI declining by 17% to $821 million in the first eight months of the year (July to February). More concerningly, during this time, inflows from China—traditionally Pakistan’s biggest investor—saw a sharp fall of 80%.
FDI inflows have fluctuated greatly this fiscal year, primarily as a result of political and economic unpredictability. With $211 million, December has had the largest monthly inflows thus far.
A new organization was established with the intention of luring investment, especially from the Middle East, as a result of the SBP data showing a consistent lack of interest from foreign investors during the previous ten years.
Eight-month inflows decline by 17%, and Chinese investments sharply decline
However, of the $820 million in foreign direct investment (FDI) that Pakistan received worldwide between July and February, only $39.4 million came from Arab nations.
The United Arab Emirates contributed $23 million, Kuwait $12.2 million, Saudi Arabia $2.2 million, and Qatar $1.9 million.
When comparing fiscal 2023 to fiscal 2022, FDI inflows decreased by 25%. The current trend indicates that, given the current state of affairs, even achieving the $1.5 billion threshold received in 2023 might be considered optimistic.
The sharp decline in Chinese investment, which fell from $472.4 million to just $80.4 million in the previous year, demonstrates the detrimental effects of political unrest on investor confidence.
The investment landscape has become more complex due to concerns among Chinese power producers involving unpaid billions of rupees from the Pakistani government.
Hong Kong was the source of the largest investment from July to February, with inflows rising to $234.6 million from $150.5 million the previous year.
The amount of money coming in from the US and the UK was $79.6 million and $163.7 million, respectively, essentially unchanged from the year before. The Netherlands contributed $58.7 million.
Sector-wise, hydel electricity drew the largest investment, bringing in $301.9 million as opposed to $232.9 million the previous year. $28.9 million was drawn to thermal power. In contrast to the $316 million in inflows the previous year, the coal sector reported a net outflow of $82 million.
FDI into the power sector was $249 million overall, a significant decrease from $600 million during the same time last year.
Oil and gas power exploration brought in $151 million, up from $78 million the year before, while financial industries, primarily banks, brought in $125 million, down from $185 million.
