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As the political temperature in the country rose to unmanageable levels and the exchange rate oscillated vigorously, it was expected that foreign investment in the country would be affected. In March, foreign direct investment in the country was a net outflow of $30 million versus a net inflow of $173.4 million in a similar period last year, as per the central bank’s latest data release. The slowdown in an already slow FDI environment has been visible since the beginning of the year 2022. Where FDI in March 2022 was negative, FDI in February 2022 fell by a staggering 34 percent year-on-year, whereas the month-on-month decline was 17 percent.

Overall, FDI in 9MFY22 slipped by 2 percent year-on-year. While some experts believe that one-time net outflow is not significant, the two percent decline in 9MFY22 FDI comes from an already low base of FY2021 when the global covid pandemic impacted foreign investment.

The FDI situation in the country has been dreary and dull, and the recent political turmoil in the country has further dented the prospects. The net outflow of FDI in March 2022 was primarily due to outflows from the telecom sector. Country-wise data from SBP shows that China and Norway both contributed to the net FDI outflow in March 2022.

The overall picture of the foreign investment in the country hasn’t changed much over a long time, especially since inflows from China started declining after key CPEC projects were over. The lack of diversification, failure to increase export-oriented FDI

And mediocre attitude of the Board of Investments has contributed to the sorry state.

Attracting FDI in the country has been a challenge for the longest time because of the country’s inherent structural and economic issues and the decline in investor interest either due to the security situation of the country, political instability, geopolitical volatility, or global events like the pandemic. Moreover, the buffer that initial CPEC projects provided is also not there; while they work on the second development phase, including the SEZs, it has not picked up the pace.

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