KARACHI: The Foreign Direct Investment (FDI) in Pakistan fell by 28 percent in the first 11 months of this fiscal year (FY21). The State Bank of Pakistan (SBP) on Friday reported that Pakistan fetched FDI amounting to $1.752 billion in July-May FY21 compared to $2.423 billion in the same period of last fiscal year (FY20), showing a decline of $671 million.
The FDI inflows were slightly lower than last year and the main drop in net FDI was due to a sharp increase in outflows during the period. During the period under review, FDI inflows were $2.769 billion, down 10 percent, as against outflow of $1.01 billion, rose 49 percent.
Month on Month basis, FDI was increased by 63 percent to $198.3 million in May 2021 as against $121.4 million in May 2020. During May 21, FDI inflows were $263.5 million and as against FDI outflows of $65.1 million.
In terms of fresh FDI into Pakistan, China is still dominated the profile, with investments continuing to flow into CPEC related projects. China’s share in Pakistan’s FDI stood at 42 percent. Overall, foreign investment from China fell 14 percent to $728 million in first eleven months of current fiscal year.
According to SBP, global FDI recorded a sharp drop of around 42 percent in 2020 and this drop was quite higher than the dip recorded in worldwide FDI during the global financial crisis. The SBP in its recent report mentioned that the decline was concentrated in the advanced economies, whereas the developing countries were, on aggregate, less affected.
Greenfield investments were impacted, mainly due to the uncertainty about the global trajectory of Covid-19 cases; the risk of lockdowns; the scale and efficacy of the governments’ Covid-related support; and the rollout of the vaccination programs.
Moreover, the multinational corporations (MNCs) also reduced their new equity investments, whereas parent firms withdrew intra-company loans from their affiliates to strengthen their own balance sheets.
Despite the improved activity at the equity market, the second component of foreign investment, ie, portfolio investment also posted negative growth. Foreign portfolio investment recorded a net outflow of $ 285 million in the first eleven months of this fiscal year. The outflows were recorded from both debt and equity securities.
Similarly, total foreign investment in Pakistan, comprising FDI, portfolio investment and foreign public investment rose sharply by 107 percent during July-May of this fiscal year mainly due to sell of some $2.5 billion worth Eurobonds in the world market. The country’s total foreign investment surged to $3.925 billion in July-May FY21 compared to $1.895 billion in same period of FY20.
Copyright Business Recorder, 2021