Gulf Times - Gulf Times Business
Pakistan attracts $2.77bn foreign direct investment in FY 2017-18
Pakistan’s net foreign direct investment (FDI) increased 0.8% to $2.77bn in the last fiscal year, compared with $2.75bn during 2016/17, the central bank data showed yesterday.
However, FDI was $291.5mn in June, 21.76% higher than the corresponding month of the previous year, the State Bank of Pakistan (SBP) data showed.
Analysts expected that the FDI would reach to around $3bn in FY18.
FDI inflows remained concentrated in power, construction and energy sectors. The bulk of the inflows came from China, United Kingdom, Malaysia and Hong Kong.
China was the major source of FDI inflows in the power and construction sectors, as its investments remained focused on the China-Pakistan Economic Corridor (CPEC) project.
Pakistan fetched $1.58bn in FDI from Chinese firms in FY18, compared with 1.21bn in the previous fiscal year.
Net inflows of FDI in the power sector rose to $885.3mn in July-June FY18 from $700mn in the same period of FY17.
Construction-related businesses attracted $707.3mn worth of foreign investments in 12 months of the last fiscal year as against $465.9mn recorded in FY17. Oil and exploration companies invested $194.8mn, compared with $146mn in FY17.
However, the financial sector continued to witness decline in FDI inflows during the period under review. FDIs in the banking sector fell to $276mn in FY18 from $296.1mn in FY17.
Portfolio investment at Pakistan Stock Exchange posted an outflow of $240.7mn in FY18 against $512.8mn during FY17.
The SBP’s data revealed that total foreign investment sharply increased 99.4% to $4.977bn in FY18.
The central bank, in its third quarterly report stated that the weakening of the US dollar against a basket of major international currencies explained the divergence in the private equity flow trend to and from Pakistan.
The portfolio realignment by foreign investors in the wake of weakening US dollar increased volatility in the global capital flows, as well as in Pakistan, specifically in July-January FY18, it added.
Foreign investors repatriated funds by liquidating emerging market assets, including in Pakistan.
The SBP’s report further said that import bill would likely stay high owing to a notable increase in international commodity prices, especially of oil. This would keep the trade deficit high in FY19 as well.
“Furthermore, the FDI inflows are expected to remain lower in FY19 than last year as a number of CPEC energy projects are in their advance stages of completion.
Therefore, in overall terms, the high current account deficit, together with limited financial inflows, will continue to keep the balance of payments under pressure.”
The SBP further noted the political uncertainty due to the upcoming elections. “Moreover, the political uncertainty arising due to upcoming general election may have dampened the prospect of further inflows in the portfolio investment, as investors may hold their fund till new government unfolds its future policy direction,” it noted.