Foreign Direct Investment (FDI) during October 2020 witnessed a growth of 151% to $317 million as compared with $126 million recorded in the same period last year.
FDI in the real sector has improved gradually in the country compared to preceding months as it stood at $189 million and $112 million in September and August respectively, according to the data released by the State Bank of Pakistan (SBP).
During October, China invested $228.7m while the power sector absorbed around $239m in October alone. FDI during the four-month period from July to October jumped nine percent to $733m compared to $672m in the year-ago period.
However, on an annual comparison, Foreign investment showed a massive dip of 62.2 percent collectively for the four months, July to October 2020, as compared to the previous financial year. Some of this decrease can be attributed to the slowing down of global foreign investments due to the COVID-19 outbreak.
On the other hand, foreign portfolio investment resulted in an outflow of $280 million from Pakistan, showing the divestment trends from investors in the equity market and debt securities.
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Analysts believe that investment inflows may remain subdued in the next few months due to the continued uncertainty resulting from the possible closure of businesses in different countries. However, the news regarding the vaccination of coronavirus disease may reduce the incidents of lockdowns in several countries, resulting in positive inflows of investments in different sectors of the country.
The month of October remained positive for the economy in Pakistan, including major macroeconomic indicators such as remittances, exports, Large Scale Manufacturing (LSM), reserves, and Rupee appreciation.
Foreign Investment During Jul-Oct FY21
Overall, foreign investment inflows recorded a 62.2 percent downfall in the period of July to October for the financial year 2020-21 as foreign investors refrained from investing in the Pakistani market despite the government’s efforts to attract foreign investors in various sectors.
According to SBP, the foreign investment inflows stand at $425 million from July to October in the current financial year 2020-21 as compared to investments of $1.125 billion reported in the similar period of last financial year.
The overall inflows of investment witnessed a negative trend as the investments from major economies have slowed down since the COVID-19 outbreak worldwide.
The government has introduced various steps to attract foreign investment, particularly from overseas Pakistanis, such as Naya Pakistan Certificates (NPC). SBP also recently announced a new set of rules for the repatriation of disinvestment proceeds from Pakistan that is expected to serve as an incentive to attract investment in the country.
Some sectors, however, showed an improvement in investment numbers to the tune of $733 million, despite the overall slump. The power sector attracted the highest investment of $352 million.
Financial businesses attracted FDI of $118 million in the first four months (July-October) of the current fiscal year, followed by the oil and gas sector with an FDI value of $83 million.
China, Malta, and the Netherlands were the top three investors in Pakistan with net FDI of $331 million, $74 million, and $52 million respectively from July to October.
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On the other hand, the foreign portfolio investment saw an outflow of $307.6 million during the said period as the foreign investors of the equity market opted to divest from stocks.
Debt securities also recorded inflows of $162 million in the government-backed paper, whereas the equity market saw an outflow of $145 million investment during the period.
It is pertinent to mention here that profit repatriation by multinational companies (MNCs) surged 65.1 percent to $576.8 million in the first quarter of this fiscal year, mainly due to better corporate profitability, relaxed conditions, and recovering investor confidence.
The MNCs had sent $349.2 million to their headquarters overseas in the July-September period of the last fiscal year.
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