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Pakistan foreign investment plummets 67 per cent

October 17, 2012


The State Bank of Pakistan.—File Photo

KARACHI: Foreign investment in Pakistan plummeted by 67 per cent in the first quarter, according to official data, with experts blaming the fall on poor economic management, energy shortages and persistent terrorism.

The figures from the central State Bank of Pakistan showed that net foreign direct investment (FDI) from July to September was just $87 million, compared with $263 million in the same period last year. Pakistan’s financial year begins on July 1.

The overall FDI inflow during the quarter was $287 million while the outflow was $200 million, with only the oil and gas exploration sector recording a positive net figure.

Even the normally popular telecommunications sector registered a net outflow of $100.9 million.

Analysts said FDI inflows have been falling for the last four years.

“Poor economic management and persistent militancy has forced investors away from a market which has huge potential and prospects,” said economist A.B. Shahid.

Earlier this month the International Monetary Fund (IMF) said Pakistan’s economic situation was worsening and the country faced a return to double-digit inflation as the government prints money to finance its deficit.

The IMF also predicted growth of just 3-3.5 per cent and warned the country’s external accounts were deteriorating, with incoming investment slowing and the central bank’s reserves dropping.

“But the biggest of the negatives is the deteriorating law and order situation that seems unmanageable,” Shahid said.

Pakistan has repaid $1.3 billion of IMF loans in four instalments, including a $400 million chunk in August, and is due to pay a further $2.5 billion in the current fiscal year, which ends on June 30.

The central bank said Pakistan had foreign reserves of $14.4 billion dollars as of last week.