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Foreign investment plunges 46pc

Updated November 15, 2018

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FDI inflows during July-October 2018-19 were limited to just $600.7 million against $1,119.9m last year. — File
FDI inflows during July-October 2018-19 were limited to just $600.7 million against $1,119.9m last year. — File

KARACHI: Foreign direct investment (FDI) fell by 46 per cent in the first four months of the current fiscal year especially in October when inflows fell by 53pc, said a report of the State Bank of Pakistan (SBP) on Wednesday.

Despite China-Pakistan Economic Corridor related investments, the FDI inflows during July-October 2018-19 were limited to just $600.7 million against $1,119.9m last year.

Inflows from China totalled at $335m, which was 56pc of the total FDI during the period under review. However, the Chinese investments also plunged more than half when compared with $694.3m inflows in the corresponding period last year.

The recent four-day visit of Prime Minister Imran Khan to China was crucial to the bilateral relations between the two countries. Finance Minister Asad Umar after returning from the trip declared the problem of current account deficit had been resolved; on the other hand, the government is negotiating with the International Monetary Fund (IMF) for a bailout package.

In addition to that, inflows from other countries have also been declining mainly due to the increasing Chinese influence in Pakistani economy. Significant inflows were recorded at $64.5m from UK, $45m from USA, $43.9m from Korea and $36.3m from Switzerland during the period under review.

Month-on-month, inflows in October were visibly poor dropping to just $161m compared $345.6m in the same month last year; a fall of 53.4pc.

The SBP data revealed a 15pc jump in remittances from overseas Pakistanis and the trade deficit has also reduced; however, despite these improvements, increasing oil prices in the international market could jeopardise the government’s effort to fix the ailing economy.

In an effort to avoid an outright economic crisis, the government recently announced that Saudi Arabia would provide $3 billion for deferred oil payments and deposit $3bn in the account of SBP. However, central bank’s reserves have not seen any rise ever since the announcement was made during the last week of October.

The delay in the Saudi funds has affected the exchange rate stability as foreign exchange reserves are declining each day mainly on account of debt servicing payments.

The outflow of portfolio investment was 269m compared to outflow of 57m in the same period of last year. The large outflow led to overall decline in the foreign private investment during the four months of this fiscal by 68pc to $1,062m.

Published in Dawn, November 15th, 2018

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