FDI dips by 40 percent in July-Aug 2018

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–‘Situation to remain bleak unless govt comes up with a favourable policy for investors’

KARACHI: Foreign direct investment (FDI) dipped by 40 percent to $288.2 million during first two months of the current fiscal year as compared to $480.6 million received in same period last year.

According to the data released by the State Bank of Pakistan (SBP) on Friday, construction sector remained the leader among all sectors, bringing $105.6 million in Pakistan during the last two months. In August 2018, the country only received $160.1 million in the head of direct investment compared to $246.8 million recorded in the same month last year.

Pakistan received FDI inflows of $407.8 million in the last two months, while investors pulled back their $119.6 million in the same period, it was revealed.

Umair Naseer, an analyst at Topline Securities, said, “The overall business situation across the world is not very encouraging, while Pakistan witnessed volatility following the formation of the new government in July and August. People as of now have no confidence as they await new policies of the elected government.”

He said FDI is likely to remain on the lower side during the next few months unless the government announces any favourable policy to win the investors’ trust.

According to SBP, foreign private investment of the country stood at $158.7 million in July-Aug, down by 57.7 percent as compared to $374.9 million in the same period last year.

During the first two months of 2018, the SBP recorded outflows of $129.6 million in the head portfolio investment (Debt Securities), down by 22.6 percent as compared to last year outflows of $105.7 million in the same period.

The SBP received an amount of $0.1 million in the head of foreign public portfolio investment (Debt Securities) in two months, increasing by 100 percent during July-Aug this year which was at negative $49.6 million in the same period last year, the data said.

Chinese companies under the China-Pakistan Economic Corridor (CPEC) invested an amount of $170.6 million in July-Aug 2018, while the United Kingdom invested $37.4 million and Switzerland invested $32.4 million in Pakistan.

Major investment during the period were received from USA ($20.5m), Singapore ($15.4m), Italy ($10.4m), and Japan ($8.6m). Meanwhile, Norway, Kuwait and Netherland pulled back their investments from Pakistan.

Sectors that received major investments included construction ($105.6m), oil and gas ($21.6 m), power ($43.3m), financial business ($33.3m) and personal services ($11.4m). Major outflows were recorded in telecommunication ($26.3m), communication ($21.4m) and beverage industry ($6.8m).

According to SBP, an amount of $87.3 was withdrawn from equity market in August. Pakistan received an amount of $4.977 billion in the last fiscal year (2017-18) compared to $2.496 billion in 2016-17. After touching the highest level of $24.6 billion in May 2017, the forex reserves had declined to below $16.070 billion. The stock market is being traded at around 40,000 points for the last two weeks.

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