Karachi, March 20, 2024 – The State Bank of Pakistan (SBP) announced on Wednesday that the foreign direct investment (FDI) into the country has witnessed a significant decline of 17.1 percent during the first eight months (July – February) of the fiscal year 2023-24.
According to the SBP, the FDI plummeted to $820.60 million in the initial eight months of the current fiscal year, down from $990.20 million recorded during the corresponding period in the last fiscal year. This decrease reflects a challenging economic landscape and potential investor apprehensions.
While FDI experienced a decline, there was a notable contrast in portfolio investment, which surged by a staggering 753.2 percent. Inflows into the capital market reached $46.2 million during July – February of the current fiscal year, compared to an outflow of $7.1 million in the same period of the previous fiscal year. This sharp increase in portfolio investment suggests a shift in investor preferences or market dynamics favoring short-term investments.
The net foreign private investment, encompassing both FDI and portfolio investment, saw a decline of 12 percent, totaling $866.90 million during the initial eight months of the current fiscal year. This compares to $983.10 million recorded in the same period of the preceding fiscal year. The decrease in net foreign private investment underscores the overall challenges facing the economy, potentially impacting growth and development initiatives.
In terms of debt securities, the country experienced a notable change in trends. During the first eight months of the current fiscal year, there was an inflow of $65.5 million, contrasting sharply with the outflow of $1.01 billion recorded during the same months of the previous fiscal year. This shift could be attributed to various factors including changes in interest rates, global economic conditions, and domestic policy measures aimed at attracting foreign investment.
The decline in FDI is a matter of concern for policymakers as it reflects investor sentiment and confidence in the country’s economic prospects. Factors such as political stability, policy predictability, regulatory environment, and infrastructure play crucial roles in attracting FDI. Addressing these concerns and creating a conducive environment for investment is imperative to reverse the downward trend in FDI and stimulate economic growth.
It is essential for the government and relevant stakeholders to undertake concerted efforts to address the underlying issues inhibiting FDI inflows. This may involve implementing reforms to improve the ease of doing business, enhancing investor protection measures, promoting transparency, and providing incentives for foreign investors.
Despite the challenges posed by the decline in FDI, the surge in portfolio investment and the positive inflow in debt securities indicate areas of potential growth and opportunity. By addressing the underlying concerns and fostering a favorable investment climate, Pakistan can attract greater foreign investment, spur economic growth, and create employment opportunities for its citizens.
The SBP’s data serves as a wake-up call for policymakers to redouble their efforts in attracting FDI and bolstering investor confidence in the country’s economic future. The coming months will be crucial in implementing strategic measures to reverse the decline in FDI and set the stage for sustainable economic growth and development.
