Rare Positive development reported on economic side
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After a prolonged period of stagnation, there has been a noticeable improvement in foreign investment within the country as the Foreign Direct Investment (FDI) in Pakistan experienced a 16 percent increase during the initial two months of the fiscal year FY24.
The FDI inflow into Pakistan had been steadily declining over several months, with a steep drop of 25 percent, amounting to $1.456 billion, recorded in the previous fiscal year FY23. However, there is now a resurgence in FDI, indicating a positive shift, with a growth of 16.1 percent equating to $32.5 million during the months of July and August in FY24.
According to the State Bank of Pakistan (SBP), Pakistan garnered FDI totaling $234 million during the first two months of this fiscal year, compared to $201 million during the corresponding period in the previous fiscal year FY23. Notably, during this review period, FDI inflows outpaced outflows, recording $345.3 million versus $112 million, respectively.
The revival in FDI can be predominantly attributed to increased Chinese investments in projects related to the China-Pakistan Economic Corridor (CPEC). China emerged as the leading contributor to FDI with an investment of $50.4 million during July and August of FY24, while the Netherlands secured the second position with $42 million in FDI, and Switzerland followed closely with a $36 million investment in Pakistan.
Examining the statistics on a month-on-month basis, the trend remains encouraging, with a 15 percent rise in FDI during August 2023. According to the SBP, August 2023 saw an inflow of $146 million in FDI, compared to $127 million in August 2022.
Pakistan, grappling with financial challenges, is in dire need of healthy foreign inflows to bolster its dwindling foreign exchange reserves and meet its external debt obligations.
Additionally, the second component of foreign investment, namely portfolio investment, experienced a remarkable surge of 436 percent during the initial two months of FY24. Portfolio investment reached $22.7 million in July and August of FY24, in contrast to an outflow of $6.7 million during the same period in the previous fiscal year. Foreign public investment also witnessed substantial growth, rising by 121 percent to reach $3.9 million during the review period
