FDI surges 102% YoY to $222.6mn in January

Net foreign direct investment (FDI) in Pakistan grew in January 2023 as it more than doubled to $222.6 million against $110 million in the same month of 2022.

According to data released by the State Bank of Pakistan, the surge in FDI was led by significant contraction in investment outflow coupled with jump in foreign inflow. The foreign outflows stood at $21.6 million in January 2023 as opposed to $71.6 million in same period last year.

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This is a significant improvement over net divestment of $17 million in December 2022.

Speaking to Business Recorder, Arif Habib Limited (AHL) Head of Research Tahir Abbas stated that inflows during the month of January came mainly in the power and food sectors.

“Net foreign direct investment settled at $223 million in January 2023, highest net inflow after seven months,” AHL said in a note.

On a country-wise basis, China emerged as the single largest investor with $68.4 million poured into Pakistan in January. It was followed by Japan with $59.7 million and Switzerland with $16.7 million, revealed SBP data.

On a sector-wise basis, power sector attracted $78.1 million with $58.4 million going towards coal-based projects. This was followed by food sector with $56.9 million investment and financial business with $48.7 million.

Seven-month data

The FDI during the first seven months (July-January) of the ongoing fiscal year contracted 44.2% to $683.5 million. Pakistan had reported FDI of $1.22 billion in same period of previous fiscal year.

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Abbas stated that the decline in FDI was led by 46% fall in investment in trade sector, 36% in oil and gas exploration and 19% in power sector.

Speaking to Business Recorder, Ismail Iqbal Securities (IIS) Head of Research Fahad Rauf said the decline in FDI will impact Pakistan badly.

“The inflows were low previously and now they have nearly halved. The confidence of foreign investors is falling owing mainly to capital controls imposed by the government and rampant talks of country defaulting on its liabilities.”

According to him, the future outlook for FDI in Pakistan “is not good”.

As per SBP data, mining and quarrying space saw divestment of $232.1 million in the seven months against the same period of previous fiscal year. Communications sector saw divestment of $93 million with $89 million leaving telecommunication space alone. Moreover, electronics sector saw divestment of $30.1 million.

On a country-wise basis, Australia divested net $231.5 million in seven months while China remained net investor of $200.2 million and Japan poured net amount of $133.9 million.