Foreign Direct Investment (FDI) in the country posted an increase of 15 percent during the first nine months of this fiscal year (FY16). As the country is facing energy crisis for the last few years, most of foreign investors have focused power, oil and gas sector. While chemical, communication and beverages sectors have also attracted a healthy foreign investment. Economists said despite some increase in FDI, it is still much lower than required investment for the growing economy of Pakistan.
"Some domestic and external conditions certainly contributed to lower foreign investments," they added. They believed that structural imbalances cannot be addressed, unless we are able to attract investment in exporting sectors. They said Pakistan needs much more FDI inflows in other sectors of the economy as well specialty industrial sector.
According to State Bank of Pakistan (SBP) Pakistan fetched FDI amounting to $957.4 million during July-March of FY16 compared to $832.2 million in the same period of last fiscal year, depicting an increase of 15 percent or $125.2 million. During the period under review, FDI inflows were $1.616 billion against outflow of $659 million, resulting in a net FDI of $957 million. The SBP revealed that FDI inflows, during July-March of FY15, were much higher than this fiscal year, however, the massive outflow resulted in lower FDI base last year. Overall, FDI inflows were $2.2 billion in July-March of FY15 against outflow of $1.37 billion.
During the period under review, portfolio investment witnessed a downward trend and declined by 502 percent. Portfolio investment stood negative at $346.3 million in first nine months of this fiscal year compared to $56 million in the corresponding period of last fiscal year, down $432 million. According to SBP, low profitability in oil and gas sector strained the KSE-100 index, which was already under pressure amid fears of crackdown on high-profile brokers. The index''s fall was exacerbated by foreign investors taking out $240.7 million from the KSE during the first half of FY16.
The SBP in its recent report believed that the China Pakistan Economic Corridor will provide a dash of optimism and investments under CPEC will help remove major supply-side constraints (power and infrastructure) for the industrial sector and may also contribute to a decline in the cost of doing business. Month-on-month basis, with 39 percent growth, FDI stood at $161.7 million in March 2016 compared to $116 million in March 2015. During March 2016, FDI inflows were $234.5 million against outflow of $73 million. Similarly, net foreign investment in Pakistan, comprising FDI, portfolio investment and foreign public investment, declined 70 percent to $567.2 million at the end of nine months of current fiscal year compared to $1.872 billion in the corresponding period of last fiscal year.
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