FDI Plunge Sharply in FY23

The Foreign Direct Investment (FDI) in Pakistan dipped sharply in FY23. Information indicates that the country was able to bring in just $1.46 billion in foreign direct investment in the whole of FY23, which is on par with FY13 but less than what it has been annually for the last 7 years, with the exception of FY19. While the FDI challenges continue to stress the already fragile investment landscape, the overall amount of foreign investment in Pakistan is nothing to be excited about.

According to the most recent data made public by the central bank, FDI in FY23 decreased by 25% compared to FY22. From $271 million in June of last year, FDI decreased by more than half to $114 million in June of this year. It is alarming that FDI inflows have also been progressively dropping over the past few years, with FY23 over the past 4 years seeing the worst FDI inflows.

FDI outflows have consistently ranged between $650 and $750 million, with the exception of FY21, when outflows from the telecom industry in particular soared. In addition, FDI from China, which remains the largest investor in the country, particularly in the power industry, has decreased throughout the years as FDI outflows have increased.

The emphasis should be on streamlining the systemic barriers to investment that have existed for a long time, such as the FDI approval procedure. Nevertheless, any comeback of investment in the country depends on the political and economic stability of Pakistan. Over the past year, the country’s business environment and political climate have been significant factors slowing down both business and investment.

Multinational companies’ decision to withhold profits and dividends in order to control dollar outflow is yet another factor, or rather a sub-factor, contributing to the country’s unpredictability. This decision has greatly scared away foreign investors because they see existing foreign investors as unable to repatriate their profits to their home countries.

Source: Business Recorder