FDI drops 24pc to $351mln in July-Oct, monthly decline weighs

KARACHI: Foreign direct investment (FDI) in Pakistan fell 24.1 percent to $350.8 million in the first four months of the current fiscal year of 2015/16 as drop of inflows in October offset the quarterly gains, showed the central bank’s data on Tuesday.
The State Bank of Pakistan (SBP) data showed that the FDI inflows amounted $462.5 million in the corresponding period of the last fiscal year.
In October, there was a major dip in FDI figures to $134.6 million as against $261.9 million in the same month a year ago.
In July-September, foreign investment surged to $216.2 million as compared to $200.7 million in the same period of the last fiscal year.
Analysts said Pakistan saw revival in foreign investment over the recent months amid mega China-Pakistan economic corridor projects in the country.
“The investment numbers are not encouraging, depicting that foreign investors were not bringing capital into the country despite improvement in the macroeconomic environment and stable security condition,” said analyst Khurram Schehzad at Arif Habib Limited.
“The apparent foreign investment is actually the working capital flows the multinational companies usually bring in to run their businesses.”
However, Schehzad is hopeful about the outlook, foreseeing FDI to pick up by the start of new calendar year.
“There is a likely rise in green field projects in power generation and other sectors particularly in the context of CPEC over the next year,” he said.
The International Monetary Fund (IMF) and the World Bank also see CPEC’s impact and foreign interest in the Pakistan economy.
China remained top FDI contributor during the July-October period with $272 million compared with $78.2 million a year earlier. In October, FDI from China amounted $82.5 million.
Analysts believe that this scheme can play a bigger role in lifting the GDP growth.
Besides China, they are expecting funds from other countries. However, an analyst said the CPEC projects, to be funded by Chinese EXIM banks, should not be shown as FDI. “That is essentially a loan to the project company, hence a liability in the form of loan and not equity,” said the analyst. The SBP’s data showed that power sector accounted for the largest weight in total FDI in the first four months.
This sector fetched $168 million in July-October 2015/16 as against $48 million a year earlier.
Oil and gas explorations attracted $56 million. Foreign telecommunications companies invested $77.1 million as against $131 million.
The UAE was at the second slot with $74.5 million in July-October 2015/16 compared with $63.7 million in July-October 2014/15. The United Kingdom invested $41.4 million as against $76.4 million. The US investors withdrew $104.5 million from the country as against investment of $84.3 million.
Total foreign investment rose 18.5 percent to $711.6 million from $6,004.4 million.
During the period under review, portfolio investment saw an outflow of $144.4 million from the local bourses against the inflow of $167.7 million previously.
“The share of outflows from the local equity market is relatively much lower than the outflows from the India, China and other markets,” said an analyst.