In a country with high political, economic and financial volatility, little can be expected on the foreign investment front especially when it has always been a weak link in GDP. Foreign direct investment in the country diminished by 25 percent year-on-year to only $1.5 billion dollars in FY23. And while FDI in the first month of FY24 posted an increase, the monthly net FDI in aggregate makes little contribution to the overall economy.
FDI inflows in July 2023 was around $147.7 million only, but gained 19 percent in the month versus the same period last year. FDI outflows during the month stood at $60 million, up by 22 percent year-on-year. As a result net FDI was up by 17.3 percent year-on-year to $87.7 million in July 2023. As per the data released by the central bank, China continued to be the largest foreign investor in the country in July 2023, with a total direct investment of $18 million, followed by Honking and Netherlands investing around $16.9 million and $12.1 million respectively.
Sector wise, FDI continued to be concentrated in the power sector as July 2023, and the sector also saw a jump in net FDI in the sector. This was followed by the oil and gas sector that also witnessed a growth in FDI during the month. The other key sector, telecom and communication remained flat, while the financial business sector FDI was almost nonexistent compared to July 2022.
These are precarious times. Where the country is desperate for foreign exchange investment, FDI continues to be fragile and negligible. Though the IMF uncertainty has come down to some extent, political unrest and the new caretaker government tenure will keep a lid on an already weak indicator. Little hope exists for the needle to move.
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