Net foreign investment has declined by 13 percent during the first seven months of the current fiscal year mainly due to massive outflow from portfolio investment due to of poor law and order situation and political instability.
Central bank statistics on Wednesday showed net foreign investment comprising foreign direct investment (FDI) and portfolio investment constantly on decline and net foreign investment registering a decline of some $324 million during the first seven months (July-January) of current fiscal year 2009.
With current decline, overall net foreign investment stood at 2.2317 billion dollars during the July-January of the current fiscal year as compared to 2.5557 billion dollars in the same period of last fiscal year. "Major reason behind this dip is decline in the portfolio inflows, as the foreign investors are reluctant to invest in the equity market due to political uncertainty," economists said.
However, the increase in the foreign direct investment is a positive indication and it is expected that after the successful negotiation with IMF, foreign investors would also invest in the equity market, they added.
They said that over 2.2 billion dollars net foreign investment is an encouraging figure in a situation when political uncertainty and poor law and order are prevailing in the country. They also stressed for the political stability for the breakdown of outflow from the portfolio investment.
The SBP statistics indicated that Foreign Direct Investment (FDI) during the July-January increased by 1.3 percent, while the massive outflow posted a decline of 99,412 percent in the portfolio investment. Therefore, the major decline in portfolio investment has also played a vital role in the overall decline in the net foreign investment.
FDI reached 2.587 billion dollars during the first seven months of fiscal year 2009 as compared to 2.555 billion dollars in corresponding period of last fiscal 2008, depicting an increase of 32 million dollars during July-January of current fiscal year.
Portfolio investment stood in a negative position of 356 million dollars during the period as compared to an investment of 0.4 million dollars in same period of last fiscal year 2008. Including privatisation proceeds, total private investment shows a decline of 10.6 percent to 2.266 billion dollars during seven months, which previously stood at 2.534 billion dollars.