The poor economic as well as law and order situation pushed away the foreign portfolio investors. - File photo

KARACHI: The country witnessed a sharp fall of 61 per cent in the foreign private investment during the first four months of this fiscal year.

Attraction for foreign investments seems to have vanished as both foreign direct and portfolio investments have persistently been declining for the last three years due to deteriorating law and order situation across the country particularly in big cities.

The State Bank of Pakistan on Thursday reported that the foreign private investment fell to $239.4 million during July-October period of 2011-12 against $610 million inflows noted during the same period last year, a decline of 60.8 per cent.

Similarly, the foreign direct investment (FDI) fell to just $340 million, a decline of 27.7 per cent while comparing with the same period of last year.

In recent years, the FDI has become a key in the growth of many developing countries like China, India, Brazil, Argentina, Indonesia, Thailand, etc. However, Pakistan has been facing shrinking FDI inflows mainly due to security situation.

The meagre $340 million FDI is focused too few sectors like oil exploration, telecommunication and energy sectors. Despite having vast potential for growth the oil and gas exploration and power sectors have failed to attract foreign investors.

The poor economic as well as law and order situation pushed away the foreign portfolio investors.

The State Bank reported that the net outflow from the equity market during the period under review was $100.8 million against a net inflow of $140 million during the same period of last year.

The situation may further be disappointing when Pakistan starts making payments against the IMF loan from February 2012.

Some economists doubt whether Pakistan would be able to pay back the IMF loan with interest in three years especially when the foreign exchange reserves of the country have been falling.

The State Bank reported on Thursday that the foreign exchange reserves slipped to $17.031 billion. Of the total forex reserves $13.269 billion were held by the SBP and the remaining by other banks.

Economists and analyst expressed their serious concerns over the situation that may develop once the country would start retiring the IMF loan from the available foreign exchange reserves.

The IMF had released a total of $8.940 billion under its $11.3 billion standby agreement signed with Pakistan in 2008. Apparently there is no sign that IMF would negotiate new loans as it has already refused to issue remaining tranche of the loan.