Pakistan's economic woes: FDI slumps 26% in first 2 months of FY23

Amid economic crisis in Pakistan, Net Foreign Direct Investment (FDI) in the country fell 26.1 pc during the first two months of the ongoing fiscal year (FY23), clocking in at just USD 169.5 million

Amid the unprecedented economic crisis in Pakistan, Net Foreign Direct Investment (FDI) in the country fell 26.1 pc during the first two months of the ongoing fiscal year (FY23), clocking in at just USD 169.5 million, media reports said citing the State Bank of Pakistan (SBP) data released on Wednesday.

The development comes at a time when the country is facing a deepening crisis while it makes efforts to increase foreign exchange reserves through non-debt-creating inflow.

In another grim reality, Pakistan's economy has received some USD 1 billion inflows from the International Monetary Fund (IMF) as a tranche of the Extended Fund Facility while China has rescheduled a loan it lent to Pakistan. Chinese investments has also remained elusive, Business Recorder reported.

FDI was higher last year in comparison to this year. During the same period ie. July-August in the previous fiscal year FDI stood at USD 229.5 million.

This year's FDI data reveals a sharp decline of USD 60 million from last year, reported Business Recorder. As per the SBP data, during July-August FY23, FDI inflows were USD 247.8 million against the outflow of USD 78.2 million, the media outlet reported.

In August alone, net FDI amounted to USD 110.7 million, a 12 pc decrease compared with the same month of the previous year.

The FDI data also brings to light the fading Chinese investments in Pakistan. During two months of FY23, overall Chinese investment in the country declined sharply by 31 pc.

However, China remained the largest investing country, accounting for 19.4 pc of the total share with a net FDI of USD 32.7 million compared with USD 47.5 million during the same period last year, as per Business Recorder.

After China is UAE in terms of the biggest investors in Pakistan. UAE has emerged as the second-largest investor with a net FDI of USD 25 million, compared with USD 11 million during the same period last year, an increase of 141 pc and accounting for 15 pc of the total share.

During the first two months of FY23, the energy sector attracted the major share of investment i.e. 47 pc (USD 80 million) followed by the financial business sector (USD 51 million) and communications (USD 25 million).