Net foreign investment down 61pc

RECORDER REPORT

KARACHI: Net foreign investment in Pakistan fell by 61 percent to $721 million in the first 11 months of the current fiscal year owing to energy crisis, unclear economic policies and worst law and order situation in the country.

According to the State Bank of Pakistan, net foreign investment, which comprises Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI), continues to decline because of domestic as well as international issues.

The SBP revealed that net foreign investment in Pakistan posted a decline of 60.6 percent or $1.11 billion to $721.4 million during July-May of fiscal year 2011-12 compared with an investment of $1.832 billion in corresponding period of last fiscal year 2010-11.

Although both components of investment are on decline, however, major decline has been witnessed in FPI, which stood in negative during the period under review. Despite improvement in the country's equity market, foreign investors are reluctant to invest and continue to withdraw their investment, resulting in massive fall in portfolio investment.

With a decline of 110 percent, FPI registered an outflow of $35 million in July-May of FY12 against $368 million inflows in the same period of FY11. FDI, which is more important for economic growth, has dropped by 48 percent during the period under review.

With current decline in FDI, its inflows dropped to $756.4 million in first 11 months of current fiscal year compared to $1.464 billion in same period of last fiscal year, depicting a decline of $707.5 million.

Month on month basis, performance of foreign inflows is better than initial 10 months as some $17 billion higher inflows were received in May 2012 compared with May 2011. Under the head of net foreign investment some $126.8 million fresh inflows were registered in May 2012 against $210 million in May 2011.

Economists said chronic power shortages in the country have put off long-term investors, while poor infrastructure and law and order situation are also some reasons of decline in foreign investment. "Non-economic factors are also impeding foreign inflows and need government attention," they added.