Net Foreign Direct Investment Declines By 59% During July 2019

Pakistan’s foreign direct investment (FDI) inflows declined by 59% year-on-year to $73.4 million in the first month of the current fiscal year compared to $179 million during the same period of last year, according to the data from the State Bank of Pakistan (SBP).

The country received $168.4 million inflows against the outflow of $95.1 million during July 2019.

The net FDI in Pakistan declined by 50% during the last fiscal year (July-June 2018-19) because of decreased inflows through China Pakistan Economic Corridor (CPEC).

According to the latest data from SBP, the decline in FDI was largely driven by Chinese outflows from the country during the month under review. The Chinese firms pulled $4.5 million from various businesses of Pakistan in July against $90 million in the same month last year.

Telecommunication sector

The Information Technology sector fetched $1.6 million in in Foreign Direct Investment (FDI) in July 2019. According to the statistics released by the State Bank of Pakistan (SBP), an inflow of $1.6 million and an outflow of $0.7 million was registered in the information technology sector during July 2019. The net FDI remained at $0.9 million during this period.

The overall communications sector comprising of telecommunication, information technology and postal & courier services, etc, registered $7.8 million net FDI with $24 million inflow and $16.2 million outflows.

Net FDI in software development remained $0.3 million, with $0.7 million inflow and 0.4 million outflows. Hardware development did not receive any FDI during this period.

FDI inflows for IT services remained at $0.9 million and outflow at $0.3 million thus registering $0.6 million net FDI.

Other sectors

Sector-wise, oil and gas exploration recorded the highest net FDI of $13.2 million in July, down from $19.6 million in the same month last year. This followed by the textile sector, where net investments were recorded at $10.7m and pharmaceutical and OTC products at $10.3m. On the other hand, the power sector posted an outflow of $14.4 million.

Food, power and financial sectors witnessed outflows in the first month of this fiscal year. The power sector, which was the single largest recipient of the CPEC-related net investment flows over the last few years, saw outflows of $14.4 million. However, foreign firms invested $11.6 million in the power sector in July last year.

Food and financial sectors also witnessed outflows of $5.3 million and $5.4 million in July FY2020 respectively. Pharmaceutical companies received $10.3 million worth of FDI in July FY2020 compared with $2 million in FY2019.

Country-wise FDI

The United States was the biggest source of inbound investments during the month, registering a net FDI of $16.6m in July, as against $14.4m in the same period last year. Malaysia came in second with net inflows of $14.6m, compared to just $2.5m in the same period last year.

Net from the United Kingdom plunged by 78.9pc to $11.1m, from $52.7m in July last year. The biggest outflow was noted from Kuwait at $16.7m, against $13.8m of last year.