KARACHI: Foreign direct investment (FDI) increased by 11 per cent in the first eight months of this fiscal year, but the level of inflow remained insufficient in the face of country’s piling up foreign debt liabilities.
Total FDI during July-Feb 2014-15 was $615 million compared to $553m in the same period of last year.
“The increase in FDI is way less than the country needs. The elected government has completed 20 months in power but has yet to achieve a breakthrough as far as the foreign investment is concerned,” commented an analyst.
The State Bank reported on Tuesday that total foreign inflows, including the foreign debt securities, rose to $1.776 billion; in terms of percentage the total inflows jumped by 168pc.
Debt securities are the debts issued by a government or corporation that may be traded. The original buyer of the debt security lends the issuer money in exchange for the security.
According to the SBP, the debt securities under the head of ‘foreign portfolio investment’ jumped to $974m in July-Feb compared to just $68m a year earlier.
While the foreign exchange reserves have found a stable position with $16bn, the rising foreign debt is still a serious concern for the stakeholders of the economy.
The International Monetary Fund recently praised the government’s economic policies while Moody’s appreciated Pakistan’s efforts to reform economy despite disruptive political challenges and security issues. However, foreign investments did not show any positive sign.
Most foreigners are reluctant to invest in Pakistan due to security concerns, except China, UAE and some other countries.
In fact, he highest FDI worth $175m was received from China during the eight months.
It was in stark contrast with the last year’s trend when the country withdrew $14m during the same period.
Other top investors were UAE ($153m), the United States ($117m) and the UK ($63m).
The highest net outflow of FDI during the period under review was from Saudi Arabia which withdrew $85m. The country’s net outflow in the same period of last year was $27m.
In the first eight months of last fiscal year, Switzerland was the biggest investor with $157m FDI. However, its net investment was minus $5m this year.
Pakistan has been struggling hard to improve its external account, but widening trade deficit has marred all efforts in this direction.
The country witnessed a current account deficit of $2.3bn in the first seven months of this fiscal year despite $11.75bn remittances sent by overseas Pakistanis.