The Foreign Direct Investment (FDI) has crossed one billion dollar mark, up by 72 percent, during the first 11 months of current fiscal year. For last three months the FDI inflows are presenting a glossy picture and continue to surge despite several domestic challenges - energy crisis and adverse law & order situation. Till February this year, FDI was on decline as foreign investors were reluctant to invest in the country due to slow economic activities.
However, from March 2013 onwards, the FDI continued to post upward trend and now has crossed on billion dollar level during July-May of FY13. In the current economic scenario, when the country's forex reserves are gradually depleting followed by debt payment to the International Monetary Fund (IMF), massive increase in foreign investment is a positive indication and will support the reserves.
Presently, the home remittance sent by overseas Pakistanis is the single source of foreign inflows, besides export proceeds. Analysts are expecting the FDI is likely to surge in coming years as the PML-N government in its budget proposal has also suggested 10-year tax holiday for investment in Special Economic Zones (SEZs). The State Bank of Pakistan on Friday revealed that FDI posted an increase of 72 percent or $554.5 million to $1.319 billion during first 11 months of FY13 compared to $764 million in the corresponding period of last fiscal year. During the period under review, overall FDI inflows stood at $2.645 billion against outflow of $1.146 billion.
The detailed analysis shows that both components of foreign investment, ie, FDI and portfolio investment are increasing, however, the improvement in FDI is very surprising. The FDI during the first 11 months of the current fiscal year is even higher than the total FDI of $821 million in FY12.
According to the SBP, the second component of foreign investment -portfolio investment has posted an increase of 508 percent as the country's equity market is performing well and KSE-100 index has reached all-time high level of 22,500 points. Portfolio investment inflows stood at $97.4 million in July-May of FY13 compared to outflows of $23.8 million in the same period of last fiscal year.
The country attracted some $1.416 billion Foreign Private Investment (including FDI and portfolio investment) during July-May of FY13 compared to $740.6 million in the corresponding period of last fiscal year, depicting a rise of 91.2 percent or $675.7 million.
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