KARACHI: After a drop in both remittances and exports, foreign direct investment (FDI) fell 21 per cent in the 11 months through May, though inflows in May rose on both month-on-month and year-on-year bases.

The State Bank’s data issued on Tuesday noted an FDI inflow of $149.6 million in May compared to $121.6m in April 2023 and $141.2m in May 2022.

Due to prolonged political and economic uncertainties, there was little hope in the financial circle for improvement in foreign investments.

For more than a decade, Pakistan has lost attraction for foreign investments. The current economic turmoil has badly damaged the country’s image as an attractive place for investments.

Moreover, the serious shortage of foreign exch­ange reserves turned ugly when most companies failed to send their profits and dividends out of the country.

The government held back at least $1 billion in profits from foreign investments. This is important because already only a few countries are investing in Pakistan, while China has been the biggest investor for years.

In the July-May period, the country received $1.32bn compared to $1.66bn a year ago, meaning a decline of around 21 per cent. The FDI inflows during the entire fiscal year 2021-22 were $1.55bn.

In the 11 months, the country also collectively lost $7.1bn due to a fall in exports and remittances sent by Pakistanis working abroad.

The FDI inflows from China remained the highest in July-May with $374.8m but were lower than last year’s inflows of $425.7m during the same period.

Inflows from China have been significantly higher than the inflows from other countries for the last many years.

Inflows from Japan were $168.4m against a net outflow of $10.9m a year ago. Switzerland invested $140m compared to $129.4m, while the United Arab Emirates invested $129m compared to $112m a year ago. Hong Kong also invested $94.5m against $148m last year.

The biggest net outflow was $240m to Argentina during the 11 months.

The inflows showed that the decline was from most of the traditional investors, but for some experts, it was encouraging that few countries were still interested in investing in Pakistan despite poor economic performance and continued political and economic uncertainty.

Published in Dawn, June 21st, 2023