News on the investment front has been gloomy amid the political and economic crisis; foreign direct investment in the country has plunged by percent year-on-year in 11MFY23. Foreign investment is not coming in and local investors are holding back. Weak investor confidence and similar sentiments are also recently highlighted in the Overseas Investors Chambers of Commerce and Industry’s (OICCI) business confidence survey.
The deteriorating business climate can be seen by the plummeting score in the survey. According to latest the survey, overall business confidence score for March and April 2023 was minus 25 percent, which was a steep decline from the last score recorded for September and October edition of the score of minus four percent.
The debilitating business environment is led by weakness of the manufacturing sector that witnessed a sharp decline in business confidence score due to the economic turmoil facilitated by higher inflation, increased taxation including super tax, a curb on profit repatriation and the ongoing import restrictions. Overall, the manufacturing sector recorded a decline of 22 percent. The manufacturing sector was followed by the retail/wholesale trade and services sector that experienced a decline of 21 percent and 18 percent, respectively.
The major challenges for the business growth in the country as highlighted in the latest as well as the previous surveys have been the skyrocketing inflation, followed by high taxation and currency depreciation. The space recently also analyzed the central bank’s Consumer and Business Confidence surveys, which showed that the consumer confidence in May 2023 was lower than it was during Covid, while Business confidence has been lower than it was during Covid since February 2023.
The falling macroeconomic indicators along with rising uncertainty around taxes – especially super tax, and windfall tax announced in the budget – continue to impede the business and investment environment in the country. The survey that evaluates the regional, national, sectoral, and individual businesses and investments over the past six months as well as their prospects over the next six months definitely plaints a bleak picture. The only hope however, is now pinned to the recently reached IMF staff level agreement for $3 billion, which has averted the near-term default risk for the country.
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