Foreign Direct Investment (FDI) increased by 20% in the first half of 2021-2022, reflecting an improvement in the investment environment. In 2021-22, the country received $1.86 billion in Foreign Direct Investment, which is relatively less compared to the remittances and export proceeds. In the first half of the current fiscal year, FDI amounted to $1.05 billion against the inflow of $879.7 million in the same period of 2020-21. The State Bank of Pakistan (SBP) reported that the inflow in December 2021 increased 29% to $218.7 million.
Prime Minister Imran Khan may visit China which can bring more foreign funds as Chinese investment is due for infrastructure projects. There was a $306 million inflow from China in the first half of 2021-22. During the first half of the previous fiscal year, FDI from China was $389.8 million, but it came up to $167.4 million in December.
The inflow of FDI was $1.45 billion in the first half of 2021-22; however, the outflow of FDI from the country was $397 million. Last year, the outflow was $686 million against an inflow of $1.56 billion.
Regarding portfolio investment, the net outflow this year was higher with $307 million than the net outflow of $244.4 million last year. The other important contributors to FDI were the United States, Hong Kong, Netherlands, Singapore and the United Arab Emirates, which inflowed $149 million, $110.9 million, $124.5 million, $66 million and $66.4 million to the country, respectively.
Due to debt servicing, Pakistan’s foreign exchange reserves have declined in the current fiscal year. To raise $1.5 billion, the government decided to launch a seven-year Islamic bond. Despite the record inflows of remittances with $15.8 billion, the need for higher inflows has increased up to 11% from a year ago.
Major investment by foreign investors was poured into the power sector ($364 million), followed by the financial business sector ($206 million) and the communication sector ($147 million). Emerging markets in the world and Pakistan have been faced with a difficult situation as far as FDI is concerned. However, these global factors did impact the FDI inflows; some local issues are also responsible for it.
Pakistan’s overall exports posted year-on-year growth of 24.91% to reach $15.13 billion in the first half of 2021-22. Sources in financial circles believe that the International Monetary Fund board’s meeting can produce positive results for foreign investors.
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