After a prolonged period of stagnation, there has been a noticeableimprovement in foreign investment within the country as the Foreign DirectInvestment (FDI) in Pakistan experienced a 16 percent increase during theinitial two months of the fiscal year FY24.
The FDI inflow into Pakistan had been steadily declining over severalmonths, with a steep drop of 25 percent, amounting to $1.456 billion,recorded in the previous fiscal year FY23. However, there is now aresurgence in FDI, indicating a positive shift, with a growth of 16.1percent equating to $32.5 million during the months of July and August inFY24.
According to the State Bank of Pakistan (SBP), Pakistan garnered FDItotaling $234 million during the first two months of this fiscal year,compared to $201 million during the corresponding period in the previousfiscal year FY23. Notably, during this review period, FDI inflows outpacedoutflows, recording $345.3 million versus $112 million, respectively.
The revival in FDI can be predominantly attributed to increased Chineseinvestments in projects related to the China-Pakistan Economic Corridor(CPEC). China emerged as the leading contributor to FDI with an investmentof $50.4 million during July and August of FY24, while the Netherlandssecured the second position with $42 million in FDI, and Switzerlandfollowed closely with a $36 million investment in Pakistan.
Examining the statistics on a month-on-month basis, the trend remainsencouraging, with a 15 percent rise in FDI during August 2023. According tothe SBP, August 2023 saw an inflow of $146 million in FDI, compared to $127million in August 2022.
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Pakistan, grappling with financial challenges, is in dire need of healthyforeign inflows to bolster its dwindling foreign exchange reserves and meetits external debt obligations.
Additionally, the second component of foreign investment, namely portfolioinvestment, experienced a remarkable surge of 436 percent during theinitial two months of FY24. Portfolio investment reached $22.7 million inJuly and August of FY24, in contrast to an outflow of $6.7 million duringthe same period in the previous fiscal year. Foreign public investment alsowitnessed substantial growth, rising by 121 percent to reach $3.9 millionduring the review period
