KARACHI: Foreign direct investment (FDI) fell 24 per cent year-on-year to $350.8 million during the four months to October, the State Bank of Pakistan said on Tuesday.

What is more worrying was the size of overall foreign private investment which fell by 67pc in the same period since the portfolio investment witnessed a net outflow of $144m.

FDI from China stood at $272m, or 78pc of the total amount received during July-October. The investment pattern reflects government’s failure to attract foreign investment despite a relatively peaceful environment in the country.

Take a look: Foreign investment falls by 26pc in Jul-Sept

The outflows of $144m portfolio investment cut size the overall foreign private investments to just $206m, lower than Chinese investment. Overall private investments were $630m during the four-month period of last fiscal year.

The government’s economic team seems to have pinned all its hopes on Chinese investment, leaving other options for improvement.

The country largely depends on borrowed foreign exchange, something heavily criticised by independent economists. Warnings were issued that increased borrowing would compel the country to borrow more to pay back the debts with interest.

Many reports by analysts have indicated that the debt servicing would be much higher during this fiscal year compared to the preceding year due to maturity of some debts. The government paid about $5.5 billion as debt servicing in FY15 and $6.9bn in FY14.

The impact of debt servicing is visible on the exchange rate. The rupee has been depreciating against the US dollar despite record foreign exchange reserves held by Pakistan.

The reserves may even cross $20bn with more borrowing from international donors, but the exchange rate trend indicates that the local currency, which has been forcibly held at the current level, would still remain under pressure. The rupee has lost about 4.5pc since the beginning of the fiscal year.

Pakistan receives lowest FDI in the region which affects its economic image in the world.

Published in Dawn, November 18th, 2015