Net foreign investment declined by over two billion dollars or 39 percent during the first 10 months of the current fiscal year mainly due to high portfolio investment outflows and political uncertainty in the country.
The State Bank of Pakistan on Saturday issued latest statistics of foreign investment comprising foreign direct investment and portfolio investment, which shows an overall 39.5 percent decline during July-April of FY08 as compared to same period of last fiscal year.
Net foreign investment stood at 3.601 billion dollars during the first 10 months of the current fiscal year as compared to 5.949 billion dollars in the corresponding period of FY07, depicting a decline of 2.348 billion dollars during July-April of FY08.
"Major reason behind this dip is massive decline in the portfolio inflows, as the foreign investors are reluctant to invest in the equity market due to political uncertainty," economists said.
They said although the new government has been able to improve law and order situation considerably, but the judges issue is still not resolved, affecting the foreign investment especially portfolio investment. They said that some 3 billion dollars inflows are expected by the end of June 2008, which would help to improve the foreign investment level.
"Two major deals including sale of 15 percent shares of MCB Bank to Malaysian Maybank and issuance of Global Depository Receipts (GDR) by Lucky Cement have been finalised, which are likely to bring in over 800 million dollars," they added.
They said that although Standard and Poor's has cut Pakistan's credit rating, however it would not hurt the structural inflows and the country will continue to receive structural inflows.
The State Bank statistics reveal that portfolio investment during the first 10 months declined by 93.3 percent or 1.649 billion dollars. Foreign Direct Investment has plunged by 16.7 percent to 3.481 billion dollars during the period as compared to 4.180 billion dollars during the same period of last fiscal year, depicting a decline of 699.2 million dollars during July-April of FY08.
Total private investment including privatisation proceeds shows a decline of 32.2 percent to 3.58 billion dollars, while excluding privatisation proceeds, the investment has dipped by 33 percent to 3.447 billion dollars during the first 10 months of FY08.
Economist said that current growth in the foreign investment is not sufficient enough to meet current account deficit, therefore, the government would be compelled to rely on the reserves and international debts. They said if the current trend continues, overall investment would be 4.3-4.5 billion dollars by the end of June 2008.