Foreign Direct Investment Drops 10% in July-March FY24

Foreign Direct Investment Drops 10% in July-March FY24

Karachi, April 22, 2024 – Pakistan has witnessed a notable decline in Foreign Direct Investment (FDI) during the first nine months of fiscal year 2023-24, with a 10 percent decrease compared to the same period last year, as reported by the State Bank of Pakistan (SBP).

From July 2023 to March 2024, foreign direct investment amounted to $1.10 billion, down from $1.22 billion recorded during the corresponding months of the previous fiscal year. This downturn reflects broader economic challenges and changing investor sentiments towards the market conditions in the country.

Despite the decline in direct investment, there has been a positive shift in portfolio investment, which saw a significant surge, registering an inflow of $65 million in the period under review. This is a stark contrast to the outflow of $4.4 million observed during the same period in the previous fiscal year. This uptick suggests a growing investor confidence in Pakistan’s market potential, particularly in securities and equity investments.

However, net foreign private investment, which combines both direct and portfolio investments, also witnessed a downturn. It fell by 4 percent, totaling $1.16 billion compared to $1.21 billion in the July-March period of the previous fiscal year. This overall decrease in private investment highlights ongoing concerns among foreign investors regarding Pakistan’s economic stability and the viability of its markets.

In a contrasting development, foreign public investment showed a positive trend, with the country recording an inflow of $100 million during the first nine months of FY24, compared to a significant outflow of $1.01 billion in the same period of the previous year. This recovery in public sector investment indicates a renewed focus on government-led projects which might be appealing to foreign states or multinational public corporations.

The SBP’s data release also shed light on specific sectors and countries that contributed to the FDI figures. However, specific details regarding sectorial performance were not immediately disclosed. Traditionally, sectors such as energy, construction, and telecommunications attract substantial FDI in Pakistan, driven by the country’s ongoing needs for infrastructure and technological advancement.

Analysts believe that the fluctuating trends in FDI are influenced by a variety of factors, including political instability, regulatory challenges, and economic policies. Recent measures taken by the government to improve ease of doing business and incentivize foreign investment have yet to fully reflect in the FDI inflow figures.

Looking forward, economic experts recommend that to attract more stable and increased FDI, Pakistan needs to ensure political stability, offer competitive incentives, and enhance its regulatory frameworks. Such improvements are crucial not only to attract new investors but also to retain existing ones.

In response to the current FDI trends, government officials have reportedly been discussing strategies to bolster foreign investor confidence. These include potential reforms in investment policies, enhancement of security protocols, and promotional campaigns aimed at highlighting investment opportunities in Pakistan.

As Pakistan navigates these economic challenges, the focus remains on creating a more conducive environment for foreign investors, which is vital for the country’s long-term economic growth and development.