KARACHI, April 16: The depressed foreign direct investment at the end of third quarter of this fiscal year reflected the sentiments of investors who still perceived the country to be dangerous and unstable both economically and politically.
The State Bank reported on Tuesday that the foreign direct investment during July-March stood at $622 million, about 4 per cent higher in the corresponding period of last year.
The second quarterly report of the State Bank said the slight improvement in the foreign investment was due to inflows of Coalition Support Fund (CSF).
During the nine months the total foreign investment (FDI plus portfolio investment) was up by $305m to $820m.
It is believed that the country would not see change in the FDI during the last quarter of this fiscal year in view of ongoing political and economic uncertainty.
Business community and financial analysts see little hope till the next government assumes power. The general elections are scheduled to be held on May 11 and the majority expects a split mandate.
“The case of foreign investors is more complicated than the domestic investors since the country has been facing crippling energy shortages and deteriorating security situation. It would be unrealistic to expect any pick up in FDI in such a situation,” said Aamir Aziz, a textile manufacturer and exporter.
Foreign investors will avoid to land in this country unless general security situation improves, he said. The State Bank last week released second quarterly report that said despite the improvement in the overall external account position, the country’s liquid foreign reserves declined by $1.4 billion during the first half of FY13, mainly due to the repayments to the IMF.
The adverse impact of falling reserves was well reflected in falling rupee value which depreciated by 2.6 per cent against the US dollar during the first half of this fiscal year, the report said.
This fall in the State Bank’s reserves aggravated the weaker position of the local currency which crossed the psychological barrier of Rs100 per dollar many times during the last couple of months.
The poor inflows of FDI and the absence of other sources have raised risk for the country to default. However Pakistan had never defaulted before and was still repaying heavily to IMF against the loans it obtained under the Standby Agreement.
The caretaker government is contemplating to negotiate with the IMF for loans to avoid default-like situation.