Foreign direct investment plunges 28% in 11 months

KARACHI: The foreign direct investment (FDI) inflows in the country plunged around 28 per cent during the first 11 months (July-May) of the current fiscal year, the central bank reported on Friday.

The FDI inflows stood at $1.75 billion during July-May 2020/21, compared with $2.42 billion in the corresponding period of the last fiscal year.

The State Bank of Pakistan (SBP) in its report on the second quarter of 2020/21 pointed out that the net FDI in Pakistan fell sharply, with the net inflows dropping across most sectors.

“The main drop in the net FDI was due to a sharp increase in gross outflows during the period. The higher outflows mainly reflected the repayment of intercompany loans by the telecom, electronics and power sector firms during the period.”

The central bank said a decline in FDI was witnessed globally. The global FDI fell around 42 per cent in 2020, and considering that this drop was quite higher than the dip recorded in the worldwide FDI during the global financial crisis.

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The decline was concentrated in the advanced economies, whereas the developing countries were, on an aggregate, less affected. Greenfield investments were impacted, mainly due to the uncertainty about the global trajectory of the Covid-19 cases; the risk of lockdowns; the scale and efficacy of the governments’ Covid-related support; and the rollout of the vaccination programmes.

Moreover, the multinational corporations also reduced their new equity investments, whereas parent firms withdrew intra-company loans from their affiliates to strengthen their own balance sheets, the central bank added.

The net inflows in the private foreign investment fell 33 per cent to $1.46 billion during July-May 2020/21, compared with $2.18 billion in the corresponding period of the last fiscal year.

The foreign investment in the capital market witnessed major outflows during the period. The portfolio investment recorded an outflow of $285 million during the first 11 months of the current fiscal year, compared with the outflows of $238.5 million in the corresponding period of the last fiscal year.

The foreign public investment witnessed an inflow of $2.46 billion during the first 11 months of the current fiscal year, compared with the outflows of $289 million in the same period of the last fiscal year.

The net inflows of the private and public investment recorded an increase of 107 per cent to $3.92 billion during the period under review, compared with $1.89 billion in the corresponding period of the last fiscal year.

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