Remittances have been growing and supporting the current account deficit; and the government and the central bank have been working hard to keep these foreign inflows up and going. On the other hand, foreign direct investment that has continued to dwindle and no concrete efforts can be named to fix its sorry state.
FDI’s ghastly performance can be seen in recent numbers released by the State Bank of Pakistan; 9MFY19 figures are down by 51.4 percent year-on-year, while net FDI in March 2019 stood 13 percent lower on a year-on-year basis.
The nine-month inflows this time are the lowest in the last four years as the country actually suffers from putting all eggs in China’s basket. CPEC has been the only trigger for FDI in the last few years, attracting foreign investment in sectors like power and construction. And now that the CPEC related investments have slowed down, the FDI picture is dreary than ever. The power sector witnessed a net outflow in 9MFY19, while the oil and gas exploration, financial business and construction accounted for 45 percent of the total inflows that continue to decline. While some diversification can be seen in terms of sector, China continues to be the key foreign investor.
Time and again, it has been informed that the government is focusing on export-led sectors for FDI growth, but so far the numbers don’t show any results. Moreover, the conventional sectors that have been key sources for attracting investment are also waning. There is a need for a clear-cut strategy to increase FDI in the country, something that is missing. The Medium Term Economic Framework doesn’t talk about it either. Here’s hoping that with a new finance advisor on board (with prior foreign investment and privatisation experience), FDI will get a kick start.
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