Falling FDI

China continues to be a major contributor of Pakistan’s FDI with other countries pulling out their investments

Many would argue that Pakistan’s economy has stabled, the security situation has improved and efforts are under way to control the energy crisis. They will extend their analysis and include a reduced budget deficit, increased foreign exchange reserves and low inflation. However, a complete review also reveals that external trade figures are depressing, to say the least. Exports are on a continuous downward slide and remittances have started to slow down with foreign direct investments down 53 per cent in the two-month period of July and August over the previous year.

China’s lower pace of growth has affected many economies as well; Pakistan also being enveloped in the midst of similar challenges. External trade figures are depressing, and oil prices have managed to keep the trade deficit in check. However, when it comes to the country’s exports, one can safely say that major changes need to be made to promote trade matters. Short-term subsidies and exemptions will not resolve deep-rooted, structural issues that include competitiveness. Additionally, China continues to be a major contributor of Pakistan’s FDI with other countries slowly, but gradually, pulling out their investments. Geopolitical tension with neighbouring countries is not looking promising and could also swallow the progress made under CPEC. In such a scenario, there is a dire need for stability. Pakistan barely looks to be slightly stable before events cause the country to move backwards. Falling FDI may not worry the country much right now, but it will become a huge cause of concern if the trend continues, especially given that exports, where no improvements are being made, and remittances, that lie beyond a state’s control if other countries are curtailing spending, do not show much promise either. One hopes that Pakistan can actually take steps towards improving its business environment, including bureaucratic red tape, and not spend every penny it earns on financing the budget only.

Published in The Express Tribune, September 22^nd, 2016.

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