Pakistan Foreign Investment Spotted Rise

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ISLAMABAD: Pakistan saw an increase in net foreign direct investment (FDI) in January 2023, more than doubling to $222.6 million from $110 million in the previous month.

The State Bank of Pakistan’s data show that the surge in FDI was caused by a significant decrease in investment outflow and an increase in foreign inflow. In January 2023, there were $21.6 million in foreign outflows, down from $71.6 million during the same time last year.

Compared to the net divestment of $17 million in December 2022, this is a significant improvement.

Tahir Abbas, Head of Research at Arif Habib Limited (AHL), stated  that the power and food industries received the majority of January’s inflows.

AHL stated in a note that “net foreign direct investment settled at $223 million in January 2023, the highest net inflow after seven months.”

With $68.4 million poured into Pakistan in January, China emerged as the single largest investor by country. According to SBP data, Japan came in second with $59.7 million, followed by Switzerland with $16.7 million.

The power sector received $78.1 million, with $58.4 million going to projects based on coal. The food industry received $56.9 million in investment, followed by the financial industry, which received $48.7 million.

From July to January, the current fiscal year’s first seven months saw a 44.2% decrease in FDI to $683.5 million. During the same time frame of the previous fiscal year, Pakistan had reported FDI of $1.22 billion.

Abbas stated that investment in the trade sector fell 46%, oil and gas exploration fell 36%, and the power sector fell 19% of all FDI.

According to Ismail Iqbal Securities (IIS) Head of Research Fahad Rauf, Pakistan will be severely impacted by the decline in FDI.

Prior to this, the inflows were low, but they have now nearly halved. Foreign investors are losing faith in the country as a whole because of the government’s capital controls and frequent talk of the country defaulting on its debts.

He asserts that the prospects for FDI in Pakistan in the future “are not good.”

In comparison to the same period in the previous fiscal year, the mining and quarrying sector saw divestment of $232.1 million in the seven months, according to SBP data. There was a divestment of $93 million in the communications sector, with $89 million going to the telecommunications sector alone. Additionally, $30.1 million was divested from the electronics industry.

In terms of country, Australia sold for a net $231.5 million in a span of seven months, while China remained a net investor for a total of $200.2 million and Japan sold for a net $133.9 million.