Foreign Direct Investment (FDI) plunged by 27 percent during the first quarter (July-September) of the current fiscal year FY15 mainly due to prevailing political uncertainty in the country. Economists said the trend was not surprising, as since the beginning of this fiscal year, the FDI was on decline and expected to remain lower than the previous year.
"The ongoing political unrest in the country has also contributed to this decline, as the foreign investors have concerns regarding the government's future," said Sayam Ali, an economist at Standard Chartered. He said that during the last fiscal year, the auction of 3G technology supported the FDI inflows and this year as well the government was relaying on planned privatisation process.
"Although, the government has announced some incentives for new power/energy projects to attract investment, however, the foreign investors are still reluctant to avail these concessions due to political uncertainty," he added. Sayam said that the government had planned to generate some $2 billion through privatisation and these transactions were likely to mature in second or third quarter of the current fiscal year. He said that adverse law and order situation, energy crisis and government policies were also affecting foreign investment in the country.
The State Bank of Pakistan on Friday revealed that FDI had posted a decline of 26.6 percent during the first quarter of FY15. The FDI stood at $169.5 million in July-September FY15 as compared to $231 million in the corresponding period of last fiscal year (FY14), depicting a fall of $61.6 billion. During the period under review, the FDI inflows were $417 million against the outflow of $248 million.
The second component of foreign investment in Pakistan i.e. portfolio investment witnessed an upward trend and rose by 362 percent or $140 million during the period under review. The portfolio investment reached $178.5 million in the first three months of this fiscal year compared to $38.7 million in the same period of last fiscal year.
The net inflows of foreign investment, comprising FDI, portfolio investment and foreign public investment has narrowed down by 8.2 percent during the July-September FY15 period. After this decline, the net inflows of foreign investment in Pakistan decreased to $311 million in the first quarter of current fiscal year compared to $339 million in the corresponding period of last fiscal year, depicting a decline of $28 million.