Foreign direct investment (FDI) in different sectors of Pakistan’s economy fell 20.3% to $203.1 million in the first two months (July-August) of the ongoing fiscal year largely due to global travel disruptions and the volatile political situation in Afghanistan.
The number of foreigners visiting Pakistan for investment purposes fell drastically due to international travel restrictions arising from the Covid-19 pandemic.
According to data released by the State Bank of Pakistan (SBP) on Friday, the foreign investment in the country had stood at $254.8 million in the corresponding period of fiscal year 2020-21.
Speaking to The Express Tribune, Economist Muzammil Aslam stated that the pandemic was already hammering FDI inflows into Pakistan and uncertainty about the Afghan situation emerged as an additional threat to the foreign investment.
“These two problems held back foreign investors who were hesitant to visit the country,” he said.
Echoing his views, Arif Habib Corp Managing Director and CEO Ahsan Mehanti stated that FDI had been falling for the past one year because the Covid threat disrupted investment plans of potential foreign investors for Pakistan.
He pointed out that foreign portfolio investment had been on the rise because the investors could know about the market environment through data analysis but for infrastructure investment, physical visits were necessary.
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“Travel and mobility restrictions have adversely impacted the flow of foreign investment into Pakistan,” he said.
Intermarket Securities Head of Research Saad Ali highlighted that besides China, FDI from most of the countries showed a steep decline. “Investment nearly halved in a host of sectors. There was a notable divestment in the construction sector,” he pointed out.
“The pandemic has pushed foreign investors to hold back expansion plans for their units located in Pakistan,” he said.
Talking about monthly data, Arif Habib Limited Head of Research Tahir Abbas said that FDI came in at $113.2 million in August 2021 compared to $126.1 million in the same period of last year, registering a decrease of 10%.
Similarly, the foreign private investment in Pakistan stood at $99.6 million in August 2021 compared to $123.1 million in August 2020, showing a 19% decline, he said.
Country-wise data
China remained the largest investor during July-August 2021 with a net investment of $53.9 million, which was 32% higher than $40.8 million in the corresponding period of previous year.
It was followed by the US that poured $32.2 million during the two months under review against $15.4 million in July-August 2020, an increase of 108.6%.
Net FDI from Singapore climbed 388.6% to $23.1 million in July-August 2021 compared to $4.7 million in the corresponding months of previous year.
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FDI from the UK contracted 9.85% to $18.8 million in July-August 2021 compared to investment of $20.9 million in the same period of last year.
Inflows from Hong Kong surged 30% to $18.6 million in July-August 2021.
Sector-wise inflows
The power sector topped the FDI chart as it attracted an investment of $85.8 million during July-August 2021 compared to $62 million in the same period of previous year, an increase of 38.4%.
It was followed by the communication sector, which received $46 million in FDI in the two months under review against $10.7 million in the same period of last year.
On the flip side, major divestment was witnessed in transport, petroleum, chemical and construction sectors.
Published in The Express Tribune, September 18th, 2021.
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