KARACHI: The net outflow of foreign direct investment (FDI) hit a six-year high at $173 million in January reflecting the uncertain political situation in Pakistan.

The State Bank’s latest data on Monday showed that January noted a net outflow of $173.2m against a net inflow of $237m in the same month of 2023.

Since the caretaker government took charge in August 2023, the uncertainty over the political scenario has deepened. At the beginning of the new calendar year 2024, January witnessed the peak of political campaigning. It created doubts about the economic as well as political future of the country.

The latest data clearly explains the thinking of foreign investors. Analysts said this huge net outflow in January was noted after 2018. The year 2018 was also the year of uncertainty, they said.

The data shows that in January inflows of FDI were $184.7m while the outflows were $357.9m showing a net outflow of $173.2m. The data showed that during July-Jan FY24, the FDI was $689.5m against $876.8m in the same period of last fiscal year showing a decline of 21.4pc or the country had to face a loss of $187.3m FDI.

The country does not depend on FDI for its foreign exchange requirement since the inflows have shrunk to the lowest level in the region. Pakistan received just $1.5bn in FY23. The country’s biggest inflow of foreign exchange comes from overseas Pakistani workers. The remittances are even higher than the total exports of the country. Experts and analysts were of the firm belief that the situation would not improve unless a stable government took charge in Islamabad. Moreover, another successful negotiation with the IMF for the next bailout package will be necessary to improve the confidence of foreign investors. “The situation is alarming for Pakistan. The outflow reflects the erosion of confidence of foreign investors,” said a senior analyst, adding that the situation would not improve at least in the remaining four months of FY24.

Published in Dawn, February 20th, 2024