KARACHI: Foreign direct investment (FDI) into the country jumped by 67.9 per cent month-on-month to $317.3 million in October compared to $189m in September, latest data released by the State Bank of Pakistan showed on Monday.

Inflows in October were highest in 10 months since peaking at $493.03m in December, 2019.

Year-on-year, FDI increased by 150.9pc to $317.3m from $126.49m in October 2019.

Despite higher FDI inflows in October, the overall investment into the country remained poor compared to other South Asian economies as the total quantum was still the smallest in the region.

The highest inflow came from China. In fact, inflows from China, at $332m, made up for almost 45pc of the total inflows during the first four months of the current fiscal year. China has been a major contributor of foreign inflows through FDI for the last few years and is the biggest trade partner of Pakistan.

Year-on-year increase even sharper at 151pc

Moreover, Pakistan received $74m from Malta — unchanged from the previous year. The country also received $51.5m from Netherlands, and $44m from Hong Kong. In addition, the country received $37m and $25.7m from the UK and United States respectively.

Financial experts believe that the inflow during the current financial year is better than last year and encouraging as the country was able to attract inflows despite Covid-19.

However, they also believe that the inflows would not increase further during the current financial year, as Covid-19 continues to grip the global economies.

Meanwhile, total foreign investment – net of foreign portfolio and public investments – into the country declined more than 64pc or $698.2m to $425m compared to $1.12 billion in the same period last fiscal year. The sharp decline in total foreign investment was mainly due to outflows from equity and debt securities to the tune of $161.2m and $598m, respectively during the four months under review.

Foreign investors, in the last three quarters, have dumped their holdings in stocks as well as government-backed securities due to Covid-19, lower interest rates and an appreciation of the rupee against dollar.

Commenting on the outflow from equities, Mohammad Sohail of Topline Securities said “foreigners have been net sellers in Pakistan market since last few years. Better returns in developed markets and slowdown in economic growth resulting in offshore funds selling listed equities.”

Published in Dawn, November 17th, 2020