KARACHI: Foreign private investment in Pakistan fell by 66 per cent in the first seven months of the current fiscal year, raising alarms in the wake of rising current account deficit and shrinking foreign exchange reserves.
The State Bank reported on Wednesday that foreign private investment fell to $445 million during July-January against $1.306 billion during the corresponding period of last year, a fall of 65.9 per cent. The local currency is already facing immense pressure, shedding weight against the dollar which appreciated by 5.2 per cent since the beginning of the current fiscal year.
The State Bank said that after incorporating a steady flow of workers’ remittances, external current account deficit is expected to remain in the range of $3.5 billion to $5.5 billion or 1.5 to 2.4 per cent of the GDP.
The risks to external position have also increased due to worsening terms of trade, fragile global economic conditions and continued paucity of financial inflows.
The foreign direct investment in Pakistan has lost chances of an improvement as FDI is shrinking with each passing day. The limited focus of the remaining FDI is also concerning.
The SBP reported that the FDI fell by 40.7 per cent during the period as total FDI during this period stood at $594 million as against $1.002 billion in the previous year.
Except for remittances, all other sources of foreign inflows have almost dried up while payments in the coming months would be much critical that may destabilise the already vulnerable exchange rate.
About $1.1 billion are scheduled to be repaid to the IMF in the second half of the current fiscal year.
The SBP’s foreign exchange reserves declined to $12.2 billion as on Feb 9, 2012 from $14.8 billion at the end of June 2011, a fall of 2.6 billion.
The poor economic performance and de-teriorating law and order situation have distanced investors willing to put money in equities.
The SBP said during the seven months net outflow was $149 million against a positive investment of $304 million during the same period of last fiscal year.
Further details show that regional states as well as the friendly countries made insignificant investment during this period.
Highest foreign investment was received from developed countries, particularly from the United States.
Out of the total FDI, $468 million came from developed counties, including $280 million from the US.
Chine improved its investment to $46.4 million from last year’s investment of just $5.8 million.
The UAE being one of the biggest trade partners of Pakistan withdrew $7 million during this period against a total investment of $157.5 million made in the same period of last year.
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