Foreign Direct Investment (FDI) in the country crossed $ 1 billion mark in the first 10 months of this fiscal year (FY16). According to State Bank of Pakistan (SBP), Pakistan fetched FDI amounting to $1.016 billion during July-April of FY16 compared to $964 million in the same period of FY15, depicting an increase of 5 percent or $52.5 million. During the period under review, FDI inflows stood at $1.762 billion against the outflow of $746 million. In addition, FDI during the first 10 months of FY16 is even higher than the overall FDI ($923 million) arrived in FY15.
Economists said FDI is presenting an improved picture because of low base of previous years and in absolute term the volume of Foreign Direct Investment in the country is very low. "With improved law and order situation and positive economic indicators, foreign investment in the country has increased slightly, however the overall volume of FDI is still much less than expectations, mainly due to political instability, unavailability of utilities and poor infrastructure," they added.
As the country is facing a severe crisis of power, most of the investment has arrived in energy and oil and gas exploration sector. These two sectors have a share of over 74 percent in the total FDI arrived in Pakistan during this fiscal year. The SBP reported that foreign investors have invested an amount of $518 million in energy sector and $235 million in oil and gas exploration sector during the first 10 months of FY16.
Economists said within power sector, most of the increase in investment flows was noted in coal-based generation. "We believe that Pakistan needs much more FDI inflows in other sectors of the economy as well and unless we are able to attract investment in exporting sectors, structural imbalances cannot be addressed," they added.
Despite a positive economic outlook, it seems that foreign investors have adopted a wait and see policy and presently they are looking for investment opportunities only in power sector sensing high margins, they added. According to SBP, during the period under review, portfolio investment witnessed a downward trend and declined by 146 percent. Portfolio investment stood negative at $381 million in first 10 months of this fiscal year compared to $836.8 million investment in the corresponding period of last fiscal year, showing a decline of $1.218 billion.
Month-on-month basis, FDI fell by 55 percent to $59 million in April 2016 compared to $132 million in April 2015. During April 2016, FDI inflows were $146 million and outflows stood at $87 million. Similarly, net foreign investment in Pakistan, comprising FDI, portfolio investment and foreign public investment, declined by 77 percent to $615.5 million at the end of 10 months of current fiscal year down from $2.737 billion.