FDI shrinks by a quarter to $1.46bn

KARACHI: The net foreign direct investment (FDI) dropped 25 per cent to $1.46 billion in the previous fiscal year, the State Bank reported on Tuesday, indicating a poor investment environment in the country.

FDI in June more than halved to $114 million from $271m in the same month a year ago.

The country, already ignored by foreign investors for the last several years, remained under the grip of intense political and economic uncertainties during the entire fiscal year that ended this June. Successive governments have failed to attract investors despite potential.

The State Bank held back profits of foreign companies operating or sharing in the business in Pakistan. The profits were held back due to poor reserves of the State Bank, but it damaged the country’s investment environment.

The data showed that the direct investment inflows also more than halved to $141.4m in June from $293.4m in June 2022. Outflows for the month increased to $27.1m from $22.3m last year.

Inflows for the entire fiscal year dropped 21pc to $2.13bn, whereas outflows shrank 11pc to $675.6m.

The largest investor in Pakistan was China, with $432m in 2022-23 but was less than $596m in the previous year. China has been the biggest investor for last many years and the largest trade partner of the country.

Japan was the second biggest investor with $183m compared to a net outflow of $10.8m last year. Other investments included $180m from the United Arab Emirates, $134m from Switzerland, and $101m from Hong Kong. Australia noted a net outflow of $242m in the previous fiscal year.

The FDI was not as significant as remittances and exports but a key segment for the foreign inflows.

The fall in remittances and exports collectively incurred a loss of $8.4bn to the country.