FDI into Pakistan up 40% in July/August

The State Bank of Pakistan (SBP)’s data showed that foreign direct investment (FDI) into Pakistan increased by 40% to $226.7mn in the first two months of the ongoing fiscal year of 2020/21, with analysts believing that overseas investors are betting on an economic recovery from the five-months of the downturn.

The central bank’s data showed that the FDI increased by $162mn in the same period of the last fiscal year.

As per the data, the majority of new investments were seen in financial businesses, electrical machinery, and oil and gas exploration sectors.

In August, the FDI totalled $112.3mn, depicting 24% growth from the corresponding month of FY2020.

Analysts said that the persistent upward trend in the FDI is an indication of overseas investors being optimistic about the economic recovery in Pakistan.

Business activity is rebounding after the government lifted coronavirus lockdown in August.

Various sectors of the economy such as the construction, energy and manufacturing are showing signs of recovery.

A breakdown of the data revealed that the FDI in the financial sector sharply rose to $85.4mn in July-August FY2021.

That was compared with $14mn a year earlier.

FDI in the electrical machinery increased to $36.5mn from $15mn.

The oil and gas exploration sector attracted $34.3mn of FDI in two months of the current fiscal year as opposed to $25.1mn in the same period last year.

Norway was the largest investor in Pakistan, followed by Netherlands and Malta, according to the SBP data.

In July-August, investment from Norway rose to $45mn from $100,000 a year ago.

Investment from the Netherlands stood at $39.6mn compared with $3.7mn last year.

The country attracted $30mn from Malta in the first two months of the current fiscal year.

Foreign funds managers invested $59.8mn in the government securities such as treasury bills and Pakistan Investment Bonds in July-August, compared with $71mn a year ago.

The SBP data further showed that outflows from the stock market stood at $76.3mn in July-August as against inflow of $36.3mn in the same period of last fiscal year.

Total foreign investment fell 21.9% to $210.2mn during the period under review.

Foreign inflows are the lifeline of Pakistan’s economy, as the government struggles to improve its balance of payment position and pay import bills, with imports almost triple that of exports.

The government is dependent on foreign debts to reduce its current account deficit.

Current account swung into a surplus of $424mn in July compared with deficits of $100mn in June and $613mn in July last year.

Remittances and the FDI are two productive sources for economic growth, according to the analysts.