Pakistan’s FDI rebounds 16pc in Feb but challenges persist

ISLAMABAD  -  In a promising turn of events for Pakistan’s economic outlook, the foreign direct invest­ment (FDI) surged by 16% in February, marking a notable rebound from the previ­ous months’ downturn. However, despite this positive uptick, experts warned of the linger­ing challenges that continue to cast a shadow over the country’s investment prospects.

The State Bank of Pakistan (SBP) reported a significant jump in FDI to $131.2 million in February -- a welcome shift from the previ­ous month’s net outflow of $173 million. This resurgence came as a ray of hope amidst a turbulent fiscal year marred by political and economic uncertainties, reported WealthPK.

“While the increase in FDI for February is certainly encouraging, it’s essential to ac­knowledge the persistent challenges that hinder sustainable growth,” remarked Shahid Javed, an economist at SBP.

“Political instability, coupled with concerns about the investor confidence, particularly from key partners, continue to pose formi­dable obstacles to Pakistan’s economic recov­ery,” he added. Indeed, the overall trend for the fiscal year remains concerning, with FDI witnessing a 17% decline to $821 million dur­ing the first eight months (July to February). Of particular concern is the staggering 80% decline in FDI inflows from China, historically one of Pakistan’s the largest investors.

Talking to WealthPK, Hamid Haroon, for­mer economist at the World Bank, said, “The steep drop in Chinese investment signals a pressing need for the Pakistani government to address the underlying issues and re­build trust with key stakeholders”. “Efforts to streamline the regulatory processes, address outstanding payment concerns, and foster a conducive business environment are impera­tive to rekindle the investor interest,” he said.

Hamid, however, cautioned against com­placency, highlighting the necessity of taking aggressive steps to solve the structural prob­lems and provide a setting that will encour­age steady inflows of investment.

“Pakistan possesses immense potential for foreign investment, but realizing this poten­tial requires concerted efforts to address gov­ernance issues, improve infrastructure, and promote policy stability,” he said.

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