FDI drops 26% to $238m in May 2018

Decrease comes as Pakistan braces for general elections next month

KARACHI: Foreign direct investment (FDI) in the domestic economy dropped a massive 26% to $237.9 million in May 2018, apparently due to political uncertainty ahead of the general elections next month.

FDI stood at $322.7 million in the same month last fiscal year, according to the State Bank of Pakistan (SBP) notice on Wednesday.

Cumulatively, in the first 11 months, FDI slightly decreased 1.3% to $2.47 billion compared with $2.50 billion in the same period of FY17. The decrease in investment comes at a time when the country is facing huge pressure on foreign currency reserves.



Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M Abdul Aleem said, “The drop in foreign direct investment (for 11 months) is not as bad as it could have been, considering the political uncertainty in the country for the last six months.”

China remains the single largest foreign direct investor in Pakistan under its ongoing projects under the banner of the China-Pakistan Economic Corridor (CPEC). Aleem anticipated improvement in FDI after the next government comes into power, sometime in August, following the elections scheduled for July 25.



“We expect improvement in FDI from October onwards. By that time, the next government would have formed its (economic) team and announced policies to address issues in the economy,” he said.

“Foreigners are just sending investment for their ongoing projects at present. The country would see enhanced investment with initiatives of some new foreign projects from October onwards.”

Country-wise FDI

China, which is investing huge in power and infrastructure (roads) projects, invested net $95.6 million in May 2018, followed by Norway, which injected net $84.6 million in the month. United Kingdom stood the third largest investor with net $15.1 million.

Among other notable investors, Japan invested net $9.1 million and Singapore invested net $8.9 million in the month.

Kuwait divested net $21.8 million. Canada, Oman, Qatar, and United Arab Emirates (UAE) divested in range of nominal $0.3-0.6 million.

Sector-wise FDI

The country’s communications sector attracted the single largest net investment of $81.6 million in May 2018, followed by the construction sector, which attracted net $71.6 million.



Among others, hydel-power sector invited net $16.5 million, trade sector attracted net $12.9 million, cars net $9.6 million, electrical machinery net $8.3 million and petroleum refining sector invited net $8 million in the month.Foreign investors at the Pakistan Stock Exchange expedited sales in the month, as they sold shares worth $51 million, compared to $23.4 million in the same months last year. In the 11 months, they have sold shares worth $161.9 million compared to $391.7 million in the same period last fiscal year.



Cumulative foreign investment, including public and private, dropped to $186.9 million in May 2018 compared to $349 million in May 2017. During the eleven-month period, the total foreign investment shot 52.3% to $4.76 billion compared to $3.12 billion in the same period last year.

Published in The Express Tribune, June 21^st, 2018.

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