Foreign investment falls 21.2pc

Thursday, November 19, 2009
KARACHI: Net foreign investment in Pakistan fell 21.2 per cent to $910.1 million in the first four months of the 2009/10 fiscal year compared with $1.15 billion in the same period a year earlier, the central bank said.

Out of total foreign investment, foreign direct investment fell 53.2 per cent to $621.8 million in the first four months of the fiscal year which began on July 1 from $1.34 billion for the same months last year, the State Bank of Pakistan said on Wednesday.

But foreign portfolio investment flows reversed, with a $288.4 million inflow in July to October compared with an outflow of $173.9 million in the same period last year.

Authorities imposed a floor on the Karachi Stock Exchange benchmark index in August last year as political uncertainty and economic and security worries drained investor confidence.

The floor discouraged new investment and also led to a sharp outflow of funds, as foreign investors sold holdings in off-market trade.

The floor was removed in December. The International Monetary Fund (IMF) saved Pakistan from a balance of payments crisis with a $7.6 billion emergency loan package in November last year. The loan was increased to $11.3 billion on July 31.

Pakistan’s economy is in virtual recession as gross domestic product growth in the 2008/09 fiscal year of 2 per cent is about the same as population growth. The IMF has projected GDP growth flat at 2 per cent this fiscal year.

Security concerns over a Taliban insurgency based in the country’s northwest and chronic power shortages have also put off investors.