Pakistan has witnessed a four per cent decrease in foreign direct investment (FDI) during the first quarter (July – September) of the fiscal year 2021/2022 (Q1FY22), as per data released by the State Bank of Pakistan (SBP) on Monday.
The FDI figures reveal a drop to $439 million during the initial quarter of the current fiscal year, down from $457.6 million recorded in the same period of the last fiscal year. This decline has raised concerns among economic analysts and policymakers, prompting a closer examination of the factors contributing to the decrease in foreign investments.
Total foreign private investment also experienced a decline of 3 per cent, reaching $339 million during July – September of the current fiscal year, compared to $349 million in the corresponding period of the previous fiscal year.
The portfolio investment in the stock market, a significant component of foreign investments, recorded a decline in outflow during the period under review. The capital market reported an outflow of $100 million during July – September 2021/2022, showing improvement from the outflow of $108.5 million in the corresponding period of the last fiscal year. This slight improvement in the outflow could indicate some stabilization in investor sentiment, although challenges persist.
On a positive note, the State Bank received $980 million as debt securities during the first quarter of the current fiscal year, marking a notable contrast from the outflow of $37.4 million recorded in the same period of the last fiscal year. This influx of funds through debt securities suggests a renewed confidence in Pakistan’s financial instruments and may contribute to stabilizing the country’s economic outlook.
Economic experts are closely monitoring these developments and attempting to identify the underlying causes of the decline in FDI. Factors such as global economic uncertainties, geopolitical tensions, and local economic conditions may be influencing investor decisions.
Government officials have expressed their commitment to creating a more investor-friendly environment, implementing policies to attract foreign capital and stimulate economic growth. The declining trend in FDI, however, underscores the importance of addressing structural issues and implementing effective strategies to bolster investor confidence.
As Pakistan navigates through these economic challenges, policymakers will need to focus on creating a conducive environment for foreign investments, ensuring transparency, and implementing reforms that promote sustainable economic development. The coming quarters will be critical in determining whether the country can reverse the current trend and regain the trust of foreign investors.
