Some positive signs are visible with regard to the country's economy as net inflows of foreign investment in Pakistan posted an increase of 27 percent during the first eight months of current fiscal year mainly due to healthy portfolio investment.
The State Bank of Pakistan on Tuesday said that net inflows of foreign investment (comprising foreign direct investment and portfolio investment) has mounted to $1.23 billion in July-January of current fiscal year 2010-11 as compared to $969 million in the same period of last fiscal year, depicting an increase of $262 million.
The current surge in the net foreign investment has largely contributed by portfolio investment, which posted an increase of 182 percent during first eight months of FY11. While Foreign Direct Investment (FDI), a major component of foreign investment is still in negative zone. FDI is continuously on the decline for last few months, down 22 percent in July-January of current fiscal year as compared to same period of last fiscal year.
According to the SBP, FDI registered a decline of 21.8 percent or $275 million during the period. With current decline, FDI fell to $989 million during eight months of FY11 as compared to $1.264 billion in same period of FY10. Improvement in the country's equity market also helped increase portfolio investment and registered a surge of 182 percent during the period.
Overall portfolio investment stood at $242 million in first eight months of FY11 relative to an outflow of $295 million in the corresponding period of FY10. In addition, total private investment including privatisation proceeds stood at $1.301 billion in July-January of current fiscal year as compared to $1.608 billion in corresponding period of last fiscal year.
"Domestic shocks such as power shortage, worst law and order situation and uncertainty on the political front is largely hurting the FDI," economists said, adding that poor infrastructure, energy crisis and non-availability of utilities have also contributed to the slow inflows of FDI. They said, however, after the financial assistance from the International Monetary Fund (IMF), investors have reentered Pakistan's equity market by investing their capital and in next few months it will be further improved.
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