KARACHI: The country saw a net outflow of $17 million in foreign direct investment (FDI) in December, official data showed on Wednesday, with investment coming into the country plunging 59 per cent in the second half of 2022.

December’s overall outflow mainly came on the back of a $230.1m outflow to Australia, $88.4m to Norway, $33.6m to the United States, and $24m to the UK.

It was in stark contrast to an inflow of $229.8m in December 2021, according to the State Bank of Pakistan (SBP). It was the first time the monthly net FDI was in the negative since March when the outflow was $30m.

In July-December, net FDI dropped 59pc to $461m, as inflows shrank to $932.5m while outflows jumped to $471.6m. FDI was $1.115 billion in the same half a year ago, comprising $1.43bn inflows and $319m inflows.

Net inflows more than halve to $461m in July-Dec

The net outflow of FDI reflects a grim picture of an economy already crushed by growing political and economic instability. The coalition government that came to power in April has been struggling to resolve crises, which have been only growing in both number and intensity.

Independent economic experts say the government must find a quick solution before the economy hits rock bottom.

The FDI has been on the decline since August. Domestic investments have also shrunk during the ongoing fiscal year, which is another reason for poor FDI since foreign investors keenly watch domestic growth in investments.

The SBP data shows that FDI amounted to $78.5m in July, increased to $116.1m in August before taking a dive and fell to $94.4m in September, $91.5m in October, and $82.6m in November.

Besides FDI, foreign currency inflows sent by overseas Pakistanis through the Roshan Digital Account (RDA) have also dropped, amounting to $140m in December, the lowest since December 2020.

“Maybe foreign investors are also waiting for a green signal from the IMF. The country must improve its image regarding the foreign exchange reserves, which have dropped to a near nine-year low,” a senior banker said.

Published in Dawn, January 19th, 2023

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