KARACHI: Foreign Direct Investment (FDI) fell by about 29 per cent during the financial year FY21 compared to the previous year as net portfolio investment of nearly half a billion dollars in June prevented a sharper decline.

According to the data released by the State Bank on Friday, the country received total FDI worth $1.847 billion in FY21 compared to $2.597bn in FY20, a decline of 28.9 per cent.

For the last many years Pakistan has been struggling to attract more FDI but the inflows have not been able to go beyond $2.7bn, which was recorded in FY18.

The inflow during June declined by 22.7pc to $135 million compared to $174m in June FY20. The inflow had jumped by 63pc in May FY21 compared to the same month of previous fiscal but the low inflow in June changed the scenario as the FDI had registered an increase in April and May this year.

The State Bank reported earlier that the FDI in May rose to $198.3m compared to $121.4m in May FY20.

However, the inflows through portfolio investment in June FY21 showed a sharp increase that helped the overall foreign investment situation in the country. The country received net inflow of $491m in portfolio investment in June compared to an outflow of $43m in June FY20.

The financial year FY21 registered a net increase in portfolio investment by $211.5m compared to a net outflow of $281.7m in fiscal FY20, registering an increase of 175pc.

The overall foreign private investment declined by 11pc in FY21 to 2.058bn compared to $2.315bn in FY20.

The State Bank’s report showed that the biggest investor in FY21 was China as the country’s investment during the fiscal stood at $758m. However, the country’s total investment declined as the inflow from China in FY20 was $846m.

For the last many years China has remained at the top of list of investors in Pakistan.

Hong Kong was the second biggest investor in Pakistan although the inflow from the Chinese region declined when compared to last year’s $190m.

Inflows from the United States and the United Kingdom improved this year compared to the previous year. The inflows from the US and the UK stood at $155.5m and $143.5m compared to $99m and 119m in the previous year, respectively.

The inflows from the Netherlands and the United Arab Emirates were also significant, with investment from the two countries standing at $107m and $102m, respectively.

Despite the overall decline in FDI in FY21, however, the country’s external account is in a much better shape now as compared to the previous year as the foreign exchange reserves of the State Bank are at a five-year high and remittance inflows stand at $29.4bn for the year.

Published in Dawn, July 17th, 2021