KARACHI: Foreign direct investment (FDI) fell by 12 per cent in the first four months (July to October) of the current fiscal year, according to data issued by the State Bank on Wednesday.
In real terms, FDI inflows stood at $662 million during the four-month period compared to $750.6m a year ago.
In October, the inflows plunged by 24pc to $223m from $293m in the same month a year ago.
The country has been unable to attract significant FDI inflows for more than five years now.
Chinese inflows shrink to a quarter of previous year’s level
A drop in FDI would be disappointing for the government at a time when it badly needs foreign inflows and is in negotiations with the International Monetary Fund for the resumption of loans.
The biggest concern could be the inflow from China which fell drastically to $116.5m in July-October from $399.5m in the same period a year ago.
Being the largest trade partner, China is becoming more important in order to boost Pakistan’s exports. However, the declining Chinese FDI could be the outcome of low inflows for the power sector owing to surplus energy in Pakistan.
In contrast, the highest inflow during July-October came from the Netherlands, amounting to $160.5m against $11.5m a year ago. Similarly, inflows from the United States jumped to $114.3m from $27.7m in the corresponding period a year ago.
The inflows from the United Kingdom and the United Arab Emirates also showed an increase during the four-month period, rising to $57m and $59.6m, respectively.
The power sector noted a steep decline, as inflows fell to $173m compared to $467.2m in the same period of the previous year. The biggest inflow was for coal, as it attracted $78m but was too low compared to $348.2m a year ago.
FDI inflows into the financial business stood at $114.2m, an increase from $106m recorded last year.
The communications sector bounced back from the net outflow of $5.1m last year to an inflow of $93.8m this year.
The biggest improvement was noted in IT sector which attracted $70.7m compared to just $14.7m last year. IT services noted an inflow of $50.6m compared to $12.2m a year earlier.
The oil and gas exploration sector attracted $81.6m, almost equal to the previous year’s level.
The construction, which has been the prime subject of the current government, showed a net outflow of $2.8m compared to an inflow of $7.6m last year.
The construction sector could not be revived to boost domestic as well as foreign investment, with one of the major reasons being a 100pc increase construction costs.
Published in Dawn, November 18th, 2021