The inflows of total foreign investment into Pakistan have witnessed a steep decline, plummeting by 72.5 percent to $1.21 billion during the first eight months of the current fiscal year (July – February), compared to $4.42 billion in the corresponding period of the previous fiscal year, according to data released by the State Bank of Pakistan (SBP) on Friday.
The significant drop in foreign investment reflects ongoing challenges in attracting international capital, as economic uncertainties and regional factors weigh on investor confidence.
The SBP’s report highlights a 38.6 percent fall in foreign private investment, which decreased to $1.211 billion in the first eight months of this fiscal year, compared with $1.97 billion during the same period last year. The reduction in foreign private investment, which includes both Foreign Direct Investment (FDI) and portfolio investments, signals a broader slowdown in international interest in Pakistan’s economic landscape.
Foreign Direct Investment (FDI), a crucial component of foreign private investment, saw a notable decrease of 22.6 percent. The FDI inflows totaled $1.62 billion during the July – February period, down from $2.092 billion in the corresponding months of the last fiscal year. The decline in FDI suggests that global investors are exercising caution, likely driven by concerns related to Pakistan’s economic policies, political uncertainty, and currency depreciation.
Additionally, the report revealed a sharp decline in portfolio investment, another key component of foreign private investment. Portfolio investment outflows surged by 243.7 percent, resulting in a net outflow of $408.4 million during the period under review, compared to an outflow of $118.8 million in the corresponding period last year. This rise in outflows indicates that investors are pulling their short-term capital out of Pakistani markets at a faster rate than before, further weakening the investment climate.
Inflows under debt securities, which reflect investments in government bonds and other debt instruments, also experienced a dramatic decline. The SBP data shows that inflows under debt securities fell by 99.8 percent to just $5.3 million, a stark contrast to $2.45 billion in the same period last year. This collapse in debt security inflows is a reflection of investors’ risk aversion amid Pakistan’s economic challenges.
The steep reduction in overall foreign investment inflows presents a significant concern for Pakistan, particularly as the country grapples with fiscal deficits and seeks to stabilize its economy. The SBP’s figures underscore the need for urgent measures to restore investor confidence and attract foreign capital back into the country’s financial markets.