Pakistan’s central bank data on Friday showed that Pakistan’s foreign direct investment rose 63 percent year-on-year to $198.3 million in May, with significant inflows in the telecom, trade and energy sectors.
Foreign direct investment rose 25 percent month-on-month in May. It reached $121 million in May 2020.
The increase came with increased confidence in foreign investors in Pakistan on the back of signs of improvement in the country’s economic growth, resumption of the International Monetary Fund program, and improvement in the balance of payments and budget deficit. Overall sentiment improved as global economies recovered as a result of the spread of vaccines.
Data from the State Bank of Pakistan shows that the telecom sector received $73.8 million in May, followed by the trade sector ($54.5 million) and the energy sector ($44.3 million).
Norway has become a major investor in Pakistan, investing $60.2 million in May, compared to $57.5 million in the same month last fiscal year.
The premium income of Dutch companies (Netherlands) increased from $15.3 million to $53.2 million. The country collected $1.752 billion in foreign direct investment in 11 months of the current fiscal year, down 27.7 percent from a year ago. Foreign direct investment reached $2.422 billion from July to May 2021.
FDI declined in the July-May period, with inflows from major investment sources such as China, Hong Kong, the United Kingdom, the United States and the United Arab Emirates declining during the period. It reflects what analysts attribute to the difficult foreign investment environment in Pakistan. SBP analysts also pointed to the need for more progress on structural reforms in Pakistan in the second quarter report for fiscal year 2021, saying that Pakistani companies should participate more actively in the global value chain to forge partnerships with major international firms. .
Net inflows of foreign direct investment from China fell to $728 million in the July-May period of fiscal 2021, from $843 million a year earlier.
Foreign direct investment from Hong Kong reached $138 million in the July-May period, compared to $168 million in the same period last year.
Despite all the challenges, the country managed to attract $856 million in foreign direct investment in the energy sector, which is more than the $736 million it received last year. In July and May 2021, $227 million was invested in the financial sector, compared to $257 million in the previous year.
Foreign direct investment in the oil and gas exploration sector decreased from $275 million to $206 million. In terms of new investments in Pakistan, China dominated the profile, with investment continuing to flow into CPEC-related projects in the energy sector.
Here it is important to note that the first phase projects under the Economic Corridor are those that receive the most foreign direct investment from China, according to SBP’s second quarter report on the economy in fiscal year 2021. She said the focus of investment in the second stage will shift the economic corridor stage to industrial development Mechanization of agriculture, tourism and social development.
But she added that these sectors have not yet seen a large influx of foreign investment.
