FDI Outflow from Pakistan Reaches Six-Year Peak

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Foreign direct investment (FDI) outflow from Pakistan surged to a six-year high in January, reaching $173 million, amidst heightened political uncertainty, according to the latest data from the State Bank.

The net outflow of $173.2 million in January starkly contrasts with the net inflow of $237 million recorded in the same period last year, highlighting the impact of political instability on investor sentiment.

Since the caretaker government assumed office in August 2023, concerns over the country’s political future have intensified, particularly as January saw heightened political campaigning, exacerbating doubts about Pakistan’s economic outlook.

Analysts attribute the significant outflow to foreign investors’ cautious approach, reminiscent of the uncertainty witnessed in 2018.

The January data reveals FDI inflows of $184.7 million, while outflows stood at $357.9 million, resulting in a net outflow of $173.2 million. From July to January of FY24, FDI totaled $689.5 million, marking a decline of 21.4% compared to the same period in the previous fiscal year, translating to a loss of $187.3 million in FDI.

While the reliance of Pakistan on FDI for foreign exchange has diminished, with inflows at their lowest in the region, the country heavily depends on remittances from overseas Pakistani workers, surpassing total exports.

Experts emphasise the need for a stable government in Islamabad and successful negotiations with the IMF for the next bailout package to restore foreign investor confidence. The current situation, they warn, may persist throughout the remaining months of FY24, underscoring the urgency for decisive action to address political and economic uncertainties.