FDI soars to $2.56bn in fiscal year 2020
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Foreign direct investment has improved by 88% in fiscal year 2020 to $2.56 billion with major investment coming in the power and telecommunication sectors from China and Norway respectively.
However, part of that 88% figure can be attributed to the major dip in FDI in fiscal year 2019 after CPEC projects had slowed down and the rupee depreciated, which made foreign investor wary to invest.
The FDI fell by 51% from $2.78 billion in fiscal year 2018 to $1.36 billion in fiscal year 2019.
“There were multiple reasons for low FDI in fiscal year 2019. The rupee was depreciating while the phase first of CPEC completed and concerns were also raised after the new government came into power, which slowed down investment from China,” senior research analyst Karim Punjani said.
Investors are reluctant to invest in countries where currency is depreciating. This is because if foreign investors invest in a country and make 10% profit in local currency terms and the local currency depreciates by 12% during the year against dollar, then they would end up making a 2% loss on their original investment.
China has been the biggest net contributor to FDI coming into Pakistan with $844 million, followed by Norway with $402 million.
China is investing the power sector, especially in coal projects, where a $545 million investment has been made. Norway’s interest has been in telecommunication.
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