Pakistan is a volatile country. The foreign direct investment flowing into the country is no less immune to the recurrent cycles of instability. According to research by PIDE, foreign investors simply do not take much interest in the country. Trapped in a low-saving, low-investment cycle, the country ekes out an existence with a begging bowl in hand while politicians grandstand on podiums. Low demand for Pakistan’s exports in its main market, the US, deteriorating diplomatic relations, increase in debt, energy shortages and rising security concerns were some of the many factors that discouraged investors.

CPEC brought in investment but also contributed to worsening the trade balance due to imports. Investments in power, a major sector for FDI, were driven by CPEC’s first phase, according to the State Bank of Pakistan. As projects were completed, investment dropped though IT firms did receive a sizable increase in recent years. The Pandemic, politics and floods in recent months continue to make investors, local and foreign, wary of backing the lame horse of Pakistan’s economy.

Published in Dawn, The Business and Finance Weekly, October 24th, 2022