Pakistan Witnesses Sharp Decline in Foreign Direct Investment

Decline in Foreign Direct Investment

Pakistan has experienced a substantial decrease in foreign direct investment (FDI), with disinvestments totaling $173.2 million in January 2024, marking a notable decline from the $211.1 million in direct investments made in December 2023, as reported by the State Bank of Pakistan (SBP).

This decline represents the largest negative foreign direct investment since October 2018. Year-on-year comparisons revealed a decrease from $236.7 million in the same period last year. The cumulative Foreign Direct investment for the first seven months of FY24 fell to $689.5 million from $876.8 million in the prior year.

A detailed analysis indicates a 33.63% decrease in FDI inflow to $184.7 million, accompanied by a surge in outflow to $357.9 million. Portfolio investment outflows also saw a rise, with $33.8 million exiting through equity securities, a significant increase compared to the $1.1 million outflow observed in January 2023.

Foreign private divestment, encompassing both direct and portfolio investments, amounted to $207 million in January 2024, declining from the previous year’s inflow of $235.7 million. However, foreign public investment showed improvement, reaching $59.3 million compared to $8.9 million the previous year.

Overall, January 2024 marked a total foreign divestment of $147.7 million, signalling a significant shift from the $244.5 million investment recorded during the same period last year. This highlights the urgent need for measures aimed at enhancing Pakistan’s investment climate.

In response to these developments, government officials and policymakers are expected to intensify efforts to address the challenges facing the investment environment. Initiatives focusing on improving regulatory frameworks, reducing bureaucratic hurdles, and promoting investor confidence are likely to be prioritised to reverse the downward trend in FDI and stimulate economic growth.