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KARACHI: The Foreign Direct Investment (FDI) in Pakistan fell by 26 percent in the first two months of this fiscal year due to uncertainty on economic and political fronts.

The State Bank of Pakistan (SBP) Thursday reported that Pakistan fetched FDI amounting to $ 170 million in July-Aug of FY23 compared to $ 230 million in the same period of last fiscal year (FY22), depicting a decline of $60 million. During the period under review, FDI inflows stood at $248 million as against the outflow of $ 78 million.

Analysts said that foreign investors are reluctant to invest in Pakistan due to rising political and economic uncertainty. The country is facing a number of challenges on economic front particularly lower foreign exchange reserves and balance of payment.

They said that the country’s foreign exchange reserves are gradually sliding due to massive external debt servicing and the SBP’s reserves stood at $ 8.34 billion end of the last week. In this situation, foreign investors are reluctant to invest in Pakistan, they added.

The detailed analysis revealed that due to weaken performance of equity market; the foreign investors are gradually withdrawing their investments from the stock market. Accordingly, foreign portfolio investment also witnessed downward trend during the period under review. Portfolio investment registered outflow of $ 6.7 million during the first two months of this fiscal year as against outflow of $15 million in corresponding period of last fiscal year.

Similarly, total foreign investment in Pakistan, comprising foreign direct investment, portfolio investment and foreign public investment fell sharply 88 percent during the first two months of current fiscal year. Pakistan’s total foreign investment declined to $144.4 million in July-Aug of FY23 compared to some $ 1.19 billion in same period of FY22, showing a decline of $1.046 billion.

During the period under review, Chinese investment in Pakistan has slightly reduced compared to previous year, however, still China ranked first in the foreign direct investment. Chinese investors invested some $ 32.7 million in Pakistan during the first two months of this fiscal year. UAE stood second with $25.5 million investment and Switzerland ranked third with an investment of $23.3 million.

Month-on-month basis, FDI amounting to $111 million was arrived in August 2022 versus $126 million in August 2021, depicting a decline of 12 percent or $15 million. During August 2022, FDI inflows were $133 million and outflows were $23 million.

Copyright Business Recorder, 2022

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