KARACHI: Foreign investment increased to $1.657 billion in the first half of this fiscal year compared to $522 million in the same period last year, but it was mostly because of debt securities.

According to a State Bank report, overall foreign investment, including debt securities, increased by 217 per cent in the July-Dec period of 2014-15.

Debt securities are 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 SBP, debt securities under the head of ‘foreign portfolio investment’ jumped to $975m in the first half of this fiscal year as compared to $68.8m in the same period last year.

Foreign direct investment (FDI) also increased by 19pc at the end of the first half of the fiscal year, but the amount was not encouraging as it stood at $529m.

The government has been struggling to improve this situation, and has signed $34bn memoranda of understanding with China, but so far no visible change has been noticed.

Pakistan succeeded to win support of US and other IMF members against terrorism and received about $1.1bn from the donor agency last month.

Despite change in the setup at government level, no significant change was noted during the last 20 months. The FDI slightly improved to $1.6bn in FY14 from $1.4bn in FY13.

However, the biggest change came in foreign exchange reserves, which shot up to over $15bn. The State Bank reported on Thursday that total reserves rose to $15.060bn while its own reserves stood at $10.3bn.

Under the head of FDI, inflow during the six months was $1.566bn while the outflow was $1.037bn which meant that only one-third of the FDI inflow could stay in the country.

During the six months, China emerged as the biggest investor as FDI from the country stood at $147m while US appeared as second biggest investor with the FDI of $125m. Last year, FDI from US stood at $147m in the six months.

The UAE was the third largest investor in Pakistan with $103m, but it disinvested about $46m during the same period last year. The government has, so far, been unable to improve the country’s image abroad for foreign investment.

The foreign investors responded willingly to the bonds issued by the government since the returns were much higher than the prevailing rates in the international market.

 

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