KARACHI: The Foreign Direct Investment (FDI) dropped by 128 per cent in the first two months of this fiscal year, reflecting the government’s poor performance on the external-sector front.

FDI in July-August was $112m while the net inflow during the same two-month period of the last fiscal year was $241m.

Chinese investments also reduced to just $25m compared to $135m in the same period of the last fiscal year.

During a recent press conference, questions were raised about Pakistan’s ability to attract foreign investment. But the governor of the State Bank of Pakistan (SBP) dispelled the impression that only Chinese investors were bringing significant FDI into Pakistan.

However, the SBP data shows foreign investments have sharply declined with the beginning of 2016-17. FDI had witnessed some improvement in 2015-16, as it increased by 39pc year-on-year to $1.28 billion. But most of the increase was due to Chinese investments, which shot up by 130pc to $594m on an annual basis. China contributed 47pc of total FDI received in 2015-16.

The beginning of the fiscal year is not positive for the country whose dependence on Chinese investment has been increasing. The trade deficit with China is alarmingly high while unofficial imports are also in billions of dollars.

While the inflows have reduced sharply relative to the overall size of the economy, the government has devised no strategy to deal with this alarming situation, particularly in the wake of the massive job losses in the oil-rich countries and a sharp fall in exports.

Pakistan depends entirely on remittances to meet its trade deficit, which was more than $20bn in 2015-16.

The repatriation of dollars in the form of profits and dividends from Pakistan also surpassed total FDI received in the last fiscal year.

Foreign portfolio investment during the two-month period was about $41m compared to negative $71m a year ago. However, it could still not support the overall foreign private investment. Foreign private investment also fell by 14pc to $154m compared to $168m in the same period of the last fiscal year.

Significant contributors to FDI in July-August were the United States ($25m), United Arab Emirates ($24m), Norway ($20m) and the United Kingdom ($12m).

Published in Dawn September 21st, 2016

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