Foreign Direct Investment Drops by 21.4% in 7MFY24

Foreign Direct Investment Drops by 21.4% in 7MFY24

Karachi, February 19, 2024 – The State Bank of Pakistan (SBP) reported on Monday that Foreign Direct Investment (FDI) into Pakistan has experienced a significant decline of 21.4 percent during the first seven months (July – January) of the fiscal year 2023-24.

This drop raises concerns about the country’s ability to attract foreign capital and underscores potential challenges in the economic landscape.

According to SBP data, the net foreign direct investment during the initial seven months of the current fiscal year plummeted to $689.50 million, a notable decrease from the $876.8 million recorded during the corresponding period of the previous fiscal year. The decline in FDI raises questions about the factors contributing to the decrease in foreign investment and the potential impact on Pakistan’s economic growth.

Conversely, portfolio investment in the country’s capital market showcased a contrasting trend, experiencing a remarkable growth of 343 percent. The capital market saw an inflow of $37 million during July – January 2023-24, compared to the outflow of $15.2 million in the same period of the last fiscal year. This surge in portfolio investment may indicate a shift in investor preferences or a response to the changing dynamics of the global market.

The total foreign private investment in Pakistan, encompassing both direct and portfolio investment, recorded a decline of 15.7 percent, reaching $726.50 million during the first seven months of the current fiscal year. This is down from the $861.50 million reported in the corresponding months of the previous fiscal year. The decrease in foreign private investment raises concerns about the overall attractiveness of the Pakistani market for international investors.

One notable aspect of the foreign investment landscape is the influx of $59.50 million into debt securities during the first seven months of the current fiscal year. This marks a significant shift from the previous fiscal year, which witnessed an outflow of $1 billion in the same period. The increased investment in debt securities may indicate a strategic move by investors seeking stable returns amidst market uncertainties.

The decline in foreign direct investment is a matter of economic significance, as FDI plays a crucial role in boosting economic development, creating job opportunities, and fostering technological advancements. The Pakistani government may need to reassess its policies and initiatives to attract and retain foreign investors, addressing any concerns or obstacles hindering their participation in the country’s economic growth.

As the global economic landscape continues to evolve, Pakistan faces the challenge of maintaining a competitive edge to attract foreign capital. Analyzing the factors contributing to the decline in FDI and implementing targeted measures to address these issues will be essential for fostering a favorable investment environment and ensuring sustained economic progress in the coming years.