According to the State Bank’s report on Tuesday, the net foreign direct investment (FDI) in Pakistan experienced a significant drop of 25%, reaching $1.46 billion in the previous fiscal year. This decline in FDI indicates a challenging investment environment in the country.
In June, the situation worsened further, as FDI more than halved to $114 million from $271 million in the same month the previous year.
The country has been struggling to attract foreign investors due to ongoing political and economic uncertainties, despite its potential.
During the entire fiscal year that ended in June, Pakistan remained under the grip of these uncertainties, hindering investor confidence.
The State Bank’s decision to hold back profits of foreign companies operating in Pakistan due to its poor reserves further exacerbated the investment environment.
In June, the direct investment inflows also witnessed a significant decline, falling to $141.4 million from $293.4 million in June 2022. However, outflows for the same month increased to $27.1 million from $22.3 million in the previous year.The overall FDI inflows for the entire fiscal year dropped by 21% to $2.13 billion, while outflows shrank by 11% to $675.6 million.
China remained the largest investor in Pakistan, contributing $432 million in 2022-23, although this figure was lower than the $596 million in the previous year. China has been a major investor and the largest trade partner of Pakistan for many years.
Japan ranked second as the biggest investor with $183 million, compared to a net outflow of $10.8 million in the previous year. Other notable investments included $180 million from the United Arab Emirates, $134 million from Switzerland, and $101 million from Hong Kong. However, Australia recorded a net outflow of $242 million in the previous fiscal year.
While FDI is not as significant as remittances and exports, it remains a crucial segment for foreign inflows into the country. Unfortunately, the decline in remittances and exports collectively incurred a substantial loss of $8.4 billion to Pakistan.