The slump in foreign direct investment continues as the central bank reported a 29 percent year-on-year decline in the net foreign inflows in APril-23. Net foreign direct investment settled at only $122 million in April-23 compared to $171 million during April-22. This added to the overall decline in FDI that stood at 23 percent year-on-year for 10MFY23. During 10MFY23, net FDI was $1,170 million compared to $1,524 million in 10MFY22.

While China was the largest contributor with a net FDI of $348 million during 10MFY23, it can be seen from the data that the net inflows from China are also gradually declining. China was followed by net inflows as FDI from Japan and Switzerland during the 10 month period. However, in terms of value, no country has made any significant investment in the country in a long time and the trend of weak FDI - which was already sluggish in the country – has picked up much faster during the last one year. The recent economic and political turmoil has created a vacuum where the prospects of foreign investment are close to none. Political instability and investment cannot co-exist, and in Pakistan the ongoing political volatility and economic crisis are keeping investors far away.

During 10MFY23, most of the investment came in the power sector followed by financial business sector and oil and gas exploration sector – thus diversification that is much needed to widen the FDI base has been missing and the current political and economic climate only add further hurdles for any kind of diversification.

Falling remittances and declining FDI already poses serious risk to the country’s ability tomeetits external obligations. With no signs of political temperature coming down and economic worries appeasing, the uncertainty prevails and is expected for a much longer time with no signs of improvement in foreign direct investment – certainly not a good omen for the country.