FDI Dropped 17% in First 5 Months of FY2021

Foreign Direct Investment (FDI) to Pakistan dropped to $717.1 million in the first five months of the fiscal year 2020-2021, State Bank of Pakistan’s (SBP) data showed.

This shows a drop of 17 percent on an annual comparison with the same time period in the last fiscal year when Pakistan attracted $864.4 million.

While the SBP had been actively celebrating the inflow of remittances through Roshan Digital Account, which touched the highest ever amounts in November 2020, the FDI trend has been dismal.

Last month (November), the FDI inflows to Pakistan posted a negative trend primarily due to pulling out of investments from China and Norway.

The SBP data showed that FDI outflow for November 2020 stood at $16 million, as opposed to FDI inflows of $192.4 million in November last year.

China pulled out $218.6 million, while Norway took back $55.8 million from Pakistan last month.

Norwegian firms also took away $26.6 in July-November FY2021 against the inflow of $318.5 million in the same period last year.

However, despite the outflows, the net FDI from China remained positive for the overall five months of the current fiscal year, clocking in at $253.9 million for July-November FY2021. As compared to the same period in 2019, this is approximately three times higher, as last year’s count stood at $76.5 million.

Among the most attractive sectors for FDI in the time period in concern was the Power sector, which fetched an FDI of $269.2 million in July-November FY2021 as compared to $66.6 million last year.

The telecommunication sector remained prominent on the other end of the spectrum with an FDI inflow of only $11.4 million, steeply down from, $333.2 million brought in last year.

However, this comparison might not be indicative of the industry’s potential, since last year’s massive inflow took place due to a one-off payment from multinational cellular companies for renewal of their operating licenses in Pakistan.

Going forward, experts familiar with the matter are of the opinion that it is difficult to predict the FDI trend for Pakistan in the upcoming few months. The pace of global economic recovery will determine the FDI flows in the post-Covid era.