KARACHI, July 2: The fiscal year 2007-08 ending with net outflow from the portfolio investment left a big negative mark on the country’s vulnerable economic and political situation. It caused a total outflow of $4.6882 billion from the market.

The year-end final data released by the State Bank of Pakistan on Wednesday showed that the poor response of foreign portfolio investment added fuel to fire to the forex coffer of the country.

The June, the last month of the outgoing year, witnessed a net cumulative outflow of $146.6 million as the total inflows remained at $255 million while the outflows were at $402 million.

This negative situation prevailed throughout the fiscal year, which was contrary to the last fiscal year when the portfolio investment added about $1.9 billion to the total foreign private investment in the country.

The State Bank’s calculation reveals that during the year the total inflow reached $4.449 billion but the outflow exceeded it at $4.682 billion, thus the cumulative outflow was $233 million.

Analysts said the year just ended was the most instable period during the last five years and the entire year was full of incidents. They said each incident carried greater uncertainty damaging the image of the country abroad.

Unlike the fiscal 2006-07, the year ‘08 remained mostly under political uncertainty.

“The political uncertainty was the real cause of concern, which started with emergency, heightened with the murder of Benazir Bhutto and continued with the results of general elections,” said Abid Saleem, researcher at a brokerage house.He said despite formation of the new government, which presented its first budget, there was neither sign for change in the economic policies nor any indication of ending of war on the political front.

“While the economy is plagued with the rising inflation, the political situation is still not settled,” said the analyst adding that the next fiscal year would remain under the grip of same situation unless something happens to end this uncertainty.

Not only the portfolio but the foreign direct investment also declined substantially during the year as July-May figure showed that the FDI shrank by 14 per cent.

“The booming banking and telecommunication sectors protected the falling trend in foreign investment during the fiscal year just-ended,” said a senior banker. He said the banking sector had reached the saturation point due to the existing economic growth trend and would not provide much support in the coming days of the new fiscal year.

Analysts said the economic growth was the real key for attracting foreign as well as domestic investors. The uncontrolled hike in oil and gas prices with highly inflated commodity prices, it looks impossible for the country to achieve a reasonable 6 per cent economic growth, they said.

The recent action to support the share prices by imposing restriction that price of scrip can not slip more than one per cent but can move up to 10 per cent, also failed to attract foreign investment.

Most of the analysts, who are the real catalyst to bring foreign investors for portfolio investment, were of the view that no artificial step could attract the investors. They believe that the real economic growth was the only way to invite foreign investors.