FY22 has been roller coaster ride not only politically but also economically for the country. For foreign direct investment (FDI), the year wasn’t much different from FY21 except for the growth witnessed in the IT sector inflows. However, calling it one of the weak years would also not be justified as FDI in FY22 stood at around $1.87 billion up by 2.6 percent year-on-year and higher than the FDI in FY13, FY14, FY15 and FY19 despite the challenges faced this year in the shape of global economic recession and post COVID investor sentiments.
Nonetheless, foreign investment in Pakistan has been critically weak over the last decade due to the country’s structural challenges where political uncertainty and economic instability have continued to inflict wounds to these foreign inflows till today. Net FDI’s share in GDP is peanuts and has remained much below one percent in the last decade. Global factors and geopolitics also affect FDI climate in the country. Recently, war between Russia and Ukraine and the commodity super cycle are the two exogenous factors slowing down investments. And then there is the CPEC-related slowdown, which can be seen in falling inflows from China.
Despite the slowdown in Chinese FDI (29 percent year-on-year in FY22), the country continues to be the largest foreign investor in the country with power sector leading. Overall, while the power sector FDI has the largest share, net FDI in the sector was also seen falling significantly in FY22. Noticeable growth in IT and financial business was witnessed during the year. In June 2022, FDI was seen climbing by 92 percent year-on-year. However, the overall picture is much drearier today than a year ago amid nose diving investor sentiments due to political uncertainty, economic upheaval and default-like situation in the country.
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