KARACHI: The current fiscal year is coming to an end this month but the Foreign Direct Investment (FDI) is still behind the last year’s poor inflows and fell by 5 per cent during the first 11 months of the outgoing 2021-22.

According to the State Bank of Pakistan data relesed on Friday, the country received a total of $1,596.8 million during July-May FY22 against an inflow of $1,679.2m in the same period of last year, reflecting a decline of 4.9pc.

The inflows in May, however, declined by 29pc to $141.2m compared to $199.2m in the same month last year.

Pakistan could not attract foreign investors rather inflows have been declining to the lowest level compared to the inflows in the regional countries.

Inflows plunge 29pc to $141.2m in May

While many reasons are there for the poor FDI inflows including political uncertainty and widening current account deficit, the inclusion of Pakistan in the grey list of the Financial Action Task Force (FATF) caused serious damage to the country’s image abroad.

While the country has succeeded to fulfill all the requirements regarding money-laundering and terror financing, hopes are high that Pakistan will be out of the grey list soon.

Sources in the financial circle believe that coming out of the grey list would surely improve the country’s image abroad and investors may change their views about Pakistan. However, they also see depleting foreign exchange reserves, massive depreciation of the local currency against major currencies including the US dollar and widening trade and current account deficits as key challenges for the PML-N led coalition government to deal with for attracting foreign investors.

The situation is not well since the biggest investor China restricted its investment in Pakistan. During July-May FY22, the FDI from China was still the highest but half of it made last year during the same period.

The FDI from China was $373.1 million during the 11 months against the $719.5m made during the same period of last year; almost half. The inflow of FDI from the United States was $240.9m during the 11 months compared to $122.4m last year. However, the outflow $186.6m from the portfolio investment brought it down to $54.3m.

Other significant inflows were $137.3 million from Hong Kong, $132m from Switzerland, $130m from the UAE and $104.9m from Singapore.

During 11 months of FY22, a major investment was poured into the Power sector ($567m) followed by Financial Business Sector ($373mn) and Oil and Gas Exploration ($188m).

Published in Dawn,June 18th, 2022