KARACHI: March proved to be the worst month for Foreign Direct Investment (FDI) amid a deepening political crisis as the country witnessed a net outflow of $30.4 million against an inflow of $173.4m in the same period last year.

The latest data issued by the State Bank on Tuesday is shocking for the country as the new government appeared as another challenge to improve the investment climate.

The no-investment in March badly hit the overall FDI inflows which fell by 2 per cent during the first three quarters of the current fiscal year (FY22). The inflows have been declining since the beginning of this calendar year but March was devastating for foreign investments.

The inflows of FDI during July-March FY22 were $1,285 million compared to $1,311m during the same period of last year.

What could be more concerning was the inflows of FDI from China which was almost half the size it witnessed during the same period of FY21. The inflow of FDI from China was $333.5m from July-March of FY22 against an inflow of $642m in the same period of FY21.

However, in the case of the United States, almost all inflows of FDI flew back through disinvestment in portfolio investment. The FDI during 9MFY22 from the USA was $183m while the outflow from the portfolio was Rs181m. The net flow was just $2m in 9MFY22.

The second half of the current fiscal year has already been facing several negative impacts like the war in Ukraine and the oil price hike; including a surge in commodity prices in the international markets but the political crisis which resulted in the change of government in Islamabad proved more inflicting.

During the first half of this fiscal year, the FDI amounted to $1.056bn against an inflow of $879.7m in the same period of the previous fiscal FY21; an increase of 20.1pc.

However, the third quarter of the current fiscal year could hardly receive $200.8m during Jan-March which could further dent the already poor health of the external account of the economy,

Real change was noted in January since the first half of the current fiscal FY22 witnessed a growth of 20pc in FDI. The inflow in December 2021 was much higher as it jumped by 29pc to $218.7m compared to $169.4m in Dec 2020.

In Jan this year, the inflows fell to $110m from $218.7m in December 2021; the decline was 50pc in Jan compared to Dec 2021.

The FDI fell by 33pc in February year-on-year basis while it fell by 17.3pc compared to the preceding month of Jan FY22. The inflow of FDI in February this year was $90.8m

In March there were no foreign inflows while the outflows indicated a negative investment environment for the foreign investors.

The third quarter inflow was just $200.8m which could eliminate the positive growth trend of 20pc growth during the first half of FY22.

Country-wise inflows show that the second largest investment after China was from Hong Kong at 133m compared to 105m last year. Inflows from Switzerland were $107.4m, the UAE $100.8m, Singapore $90.5m, the Netherlands $71m and Malaysia $68.4m

Published in Dawn, April 20th, 2022