Foreign direct investment jumps by 45pc in June

Updated 18 Jul 2020

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Inflows in entire FY20 witness 88pc increase. — Dawn archives
Inflows in entire FY20 witness 88pc increase. — Dawn archives

KARACHI: Foreign direct investment (FDI) soared by 45 per cent month-on-month to $174.8 million in June, the State Bank of Pakistan (SBP) reported on Friday.

The increase in FDI for the entire fiscal year was even more pronounced as it surged 88pc to $2.561 billion in 2019-20, from $1.362bn in FY19.

The FDI started falling after the emergence of Covid-19 in March as lockdowns put brakes on economic activities. During that month, the country received $278m and the inflows fell to $133m in April and further to $120m in May.

Inflows in entire FY20 witness 88pc increase

However, June saw a jump of 45pc month-on-month, indicting a possible recovery.

Similarly, foreign private investment increased by 140pc to $2.279bn in FY20, compared to $947m in the preceding year. The outflow from the portfolio investment was less than the previous year, clocking in at $281m, as against $415m.

Further details show China played a key role in the improved FDI figures as its contribution stood at 33pc of the total inflows while the net FDI from the neighbor was $844m — much higher than $130.8m recorded in FY19. Another $190.7m came from Hong Kong.

Pakistan received the second biggest inflow of $402m from Norway in FY20 versus $115.9m the year before.

On the other hand, FDI from the UK declined to $117.3m in 2019-20, compared to $185m in the previous fiscal year. It was the biggest investor in the domestic bonds of the country ie treasury bills and Pakistan Investment Bonds.

Meanwhile, inflows from the US, Netherlands and Malta came in at $97m, $133m and $222m, respectively.

Despite getting hit by the coronavirus, the country achieved its major targets regarding foreign inflows except for the exports which fell in FY20.

Pakistan received record remittances of $23bn during the outgoing fiscal year and also succeeded to bring down the current account deficit to $3.288bn in 11MFY20, from $20bn in FY18.

Total foreign exchange reserves also reached three-year high to $18.95bn.

However, fears remain that the country may face decline in remittances in FY21 as reports appeared in media suggesting that hundreds of overseas Pakistanis were waiting to come back to their homeland as they lost jobs.

Not only is the Middle East vulnerable in terms of jobs for overseas Pakistanis but the United States and European countries were also posting poor economic performance since the Covid-19 outbreak.

Published in Dawn, July 18th, 2020