While media outlets are abuzz with reports of a 55 percent spike in FDI during the first two months of FY25, this growth stems from a weaker base—it’s progress, but not yet monumental. According to a recent announcement by the central bank, Pakistan attracted $350.3 million in FDI during the first two months of FY25 (July-August), an increase of $125 million compared to $225.2 million during the same period last year (FY24). FDI inflows for this period amounted to $495 million, up 38.6 percent, while outflows stood at $144.5 million, reflecting a 9.7 percent rise. In August 2024 alone, net FDI reached $214 million, marking a 51 percent year-on-year increase and a 57 percent month-on-month rise. If this pace continues, FDI for FY25 could reach approximately $2 billion, compared to $1.9 billion in FY24.
China continued to dominate as the top investor, contributing a net $129.62 million in August 2024. Close behind were Hong Kong with $27.73 million and the UK with $21.24 million. For the first two months of FY25, China maintained its lead, investing a substantial $174.69 million, nearly half of the total FDI. Hong Kong followed with $70.18 million, representing 20 percent of the total, while the UK contributed $43.51 million.
Sector-wise, FDI was heavily concentrated in the power sector, particularly in hydel and coal power, accounting for around 60 percent of net FDI in the first two months of FY25. Oil and gas and financial services followed, contributing 12 percent and 11 percent, respectively.
Despite the reported growth, FDI in Pakistan remains weak and stagnant. The narrow focus of FDI inflows, both in terms of sectors and countries, underscores a deeper issue. Recent investments have been concentrated in sectors like power, oil and gas, and financial services, leaving crucial areas such as export-oriented industries, technology transfer, and import substitution largely underfunded. Needless to say, the country’s investment strategy needs an overhaul!
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