The net inflow of foreign direct investment (FDI) in Pakistan has surged by an impressive 40% during the first two months of the current fiscal year, according to data released by the State Bank of Pakistan (SBP) on Friday.
From July to August 2020, the net FDI increased to $227 million, up from $162 million in the same period of the previous fiscal year. This significant rise highlights growing investor confidence and interest in Pakistan’s economic potential.
The data also revealed that the gross inflows of FDI registered a growth of 12%, amounting to $352 million during the period under review. This is a substantial increase compared to $314.5 million recorded in the corresponding period last year. Conversely, outflows decreased by 18%, dropping to $125.5 million from $152.5 million in the same timeframe.
However, the overall foreign private investment scenario painted a more mixed picture. While FDI saw a robust increase, portfolio investment in the capital market experienced a sharp decline. The capital market witnessed an outflow of $76.3 million during the first two months of the current fiscal year, a stark contrast to the inflow of $36.3 million recorded in the same period of the previous year. This represents a decline of 310%, indicating investor caution or reallocation of assets amidst global financial uncertainties.
As a result, the total foreign private investment fell by 24.2%, amounting to $150.4 million from $198.3 million year-on-year for the July-August period.
The rise in net FDI reflects a positive trend for Pakistan’s economy, suggesting that foreign investors are increasingly viewing the country as a viable and attractive destination for long-term investments. The decline in portfolio investment, however, indicates that market volatility and external economic conditions are influencing short-term investment decisions.
These figures underscore the importance of maintaining stable economic policies and enhancing investor confidence to sustain and build upon the positive trends in FDI. The government and financial authorities are likely to focus on creating a more conducive environment for foreign investments, addressing potential concerns that could deter portfolio investments.
As Pakistan navigates through global economic challenges, the increase in FDI is a promising sign of resilience and potential growth, essential for the country’s economic development and job creation.