Falling FDI is a matter of concern

The State Bank of Pakistan (SBP) has reported that the country received Foreign Direct Investment (FDI) amounting to $1.285 billion during July-March of FY22 as against $1.311 billion in the same month of the previous fiscal year (FY21), showing a decline of about 2%. During the period under review, overall FDI inflows were $1.967 billion against $682.4 million in outflows.

Experts believe that the country’s foreign exchange reserves are depleting and have declined to $17.28 billion, including $10.849 billion of SBP and $6.178 billion held by commercial banks. Therefore, the country needs huge foreign inflows to build the depleting foreign exchange reserves. The slow in FDI can be attributed to COVID 19 and reportedly slow pace in CEPC, and delay in advancing in the third phase of projects.

A leading financial daily has wisely encompassed the irritants in attracting FDI and stated that uncertainty is evil for foreign direct investments. Political instability and economic problems discourage foreign investors: this is a general observation in many countries in the Middle East, Africa, and South Asia, particularly Pakistan. The security and law and order situation has been a big deterrent in attracting foreign investment to Pakistan.

The rising political volatility in the country is not a good sign for foreign investment. An even more important uncertainty that has kept investors at a distance has been inconsistent policies with luck. Whether it is the lack of diversification with all eggs in one basket (Chinese CPEC) or the lack of energy reflected in the Board of Investments’ initiative to boost FDI, foreign investment policy has often come under fire.

We hope the government will pay heed to the budget proposal of the Overseas Investors Chamber of Commerce and Industry (OICCI). The apex body of foreign companies in Pakistan has submitted comprehensive taxation proposals for the upcoming budget for the fiscal year 2022-23, highlighting various measures to facilitate business and FDI and promote the ease of doing business and documentation of the economy. Besides broadening the tax base and enhancing the revenue collection to match the country’s economic potential.

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