Foreign direct investment (FDI) in Pakistan has experienced a significant decline, dropping by 21 percent in the 11 months leading up to May. However, there was a slight increase in FDI inflows in May compared to both the previous month and the same period last year.
The State Bank of Pakistan’s data revealed that FDI inflows in May amounted to $149.6 million, up from $121.6 million in April 2023 and $141.2 million in May 2022.
The country’s prolonged political and economic uncertainties have created a pessimistic outlook for foreign investments.
Pakistan has been losing its appeal as a destination for foreign investments for over a decade, and the current economic turmoil has further damaged its reputation.
The shortage of foreign exchange reserves has exacerbated the situation, making it difficult for companies to repatriate profits and dividends.
The government has withheld at least $1 billion in profits from foreign investments, worsening the already limited number of countries willing to invest in Pakistan. China has been the largest investor in the country for several years.
During the July-May period, Pakistan received $1.32 billion in FDI, a decline of approximately 21 percent compared to the previous year’s $1.66 billion. In the entire fiscal year 2021-22, FDI inflows amounted to $1.55 billion.
China remained the largest contributor of FDI from July to May, with inflows of $374.8 million, although lower than the previous year’s $425.7 million. Inflows from Japan were $168.4 million, reversing a net outflow of $10.9 million from the previous year.
Switzerland invested $140 million, while the United Arab Emirates invested $129 million, both experiencing an increase compared to the previous year. Hong Kong invested $94.5 million, down from $148 million in the previous year.
Argentina saw the largest net outflow of $240 million during the 11-month period.
While the decline in FDI was observed from most traditional investors, it is encouraging to note that some countries still show interest in investing in Pakistan despite its poor economic performance and ongoing political and economic uncertainties.