Pak Economy: Foreign investment down by 38 per cent

By Shahzad Anwar

KARACHI: Net inflow of foreign investment dropped by 38.4 per cent to $5.193 billion during the recently concluded fiscal year 2007-08, causing a gradual reduction in the country’s foreign exchange reserves and exerting immeasurable pressure on rupee-dollar parity.

Foreign investors not only reduced fresh investment but also dragged out a massive amount from equity trade amid uncertain political situation and deteriorating economic condition due to spiraling oil prices and commodity prices.

Although most major economies of the world are also facing adverse impacts of oil prices the resource constrained countries like Pakistan are facing the brunt of rising oil prices causing widening of trade and fiscal deficits and consequently stimulating inflation.

During July-June 2007-08 total foreign investment declined to $5.193 billion which was recorded $8.428 billion during fiscal 2006-07.

Latest statistics of State Bank of Pakistan (SBP) revealed that in FY08 foreign private investment stood at $5.172 billion against $6.960 billion in preceding fiscal year, whereas foreign direct investment was recorded at $5.153 billion against $5.140 billion of last year of which, privatisation proceeds were witnessed at $133.2 million as compared to $266.4 million of previous year.

During FY08 the massive outflow of 98.8 percent was recorded in portfolio investment which plunged to $19.3 million as compared to $1.824 billion in FY07.

Through Global Depository Receipts (GDRs) of UBL Bank brought an inflow of $90.5 million into country’s financial system in FY08 against $559.7 million of last fiscal year. In addition an amount of $106.5 million was brought into country through GDRs of Lucky Cement. In FY08 foreign public investment, which was mainly in portfolio declined to $20.8 million against $1.468 billion recoded in the pervious year.

From developed countries including Western Europe, Luxembourg, Denmark, France, Germany, Netherlands, Sweden, UK, other Western Europe Norway, Switzerland, North America Canada, USA other developed countries including Australia, Japan and unspecified countries dropped by 38.1 percent to $2.913 billion against $4.702 billion of previous fiscal year. However, from developing economies including Caribbean Islands, Cayman Island, Bahamas, other Caribbean countries, Africa, Libya, Egypt, Mauritius, South Africa, and other African Countries investment increased by 3.6 percent to $1.898 billion, which was recorded 1.831 billion in FY07.

From Asia including West Asia, Oman, Iran, Kuwait, Bahrain, Qatar, Saudi Arabia, Turkey, UAE the net flow of foreign investment recorded a slight increase of 2.1 percent to $1.722 billion as compared to $1.687 billion of last fiscal year. Similarly South East Asia countries including Bangladesh, China, Hong Kong, Malaysia, Singapore, India, South Korea, unspecified South East and South Asia slight surged by 0.8 percent to $836.6 million from $829.9 million of FY07.

Source: The News, 22/7/2008

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