For years, China has been at the forefront of foreign investment in Pakistan, significantly contributing to the country’s economic development. However, a notable shift occurred in January 2024, with China divesting $254.9 million, as reported by the State Bank of Pakistan (SBP). This transition has led to Pakistan experiencing a foreign direct disinvestment of $173.2 million in January, a stark contrast to the direct investment of $211.1 million in December 2023. Despite this shift, China remains a significant player, accounting for 30.01% of direct investments in Pakistan during the first seven months of the fiscal year 2024 (7MFY24), albeit with a 51.48% year-on-year decrease.

NEW FRONTIERS: DIVERSIFYING THE INVESTMENT LANDSCAPE

Amidst China’s divestment, Germany emerged as the top investor in Pakistan in January 2024, with a net direct investment of $22.39 million, followed by the United Kingdom and Hong Kong, injecting $19.87 million and $15.97 million, respectively. Throughout July-January FY24, Hong Kong led the foreign direct investment (FDI) tally, with significant contributions also coming from the UK and the USA, showcasing a diversified investment landscape.

PAKISTAN’S CURRENT ACCOUNT: A SHIFT TO DEFICIT

FDI TRENDS: A MIXED BAG OF GAINS AND LOSSES

The total FDI in 7MFY24 stood at $689.47 million, marking a 21.36% year-on-year decline from $876.78 million in 7MFY23. Despite the overall downturn, certain countries like the United Kingdom and the United States have increased their investment stakes, with the UK’s net FDI slightly growing by 0.51% year-on-year and the USA’s investment up by 9.17%.

PORTFOLIO INVESTMENT: A SILVER LINING

The Foreign Portfolio Investment (FPI) in January 2024 reflected a positive trend, with an inflow of $25.46 million. Cumulatively, the FPI during 7MFY24 showed a promising investment of $96.47 million, a significant recovery from a divestment of $1.03 billion in the same period last year.

PAKISTAN RUPEE TAKES A POSITIVE TURN: A DETAILED ANALYSIS OF REER AND NEER IN JANUARY 2023

TOTAL FOREIGN INVESTMENT: RECOVERY AND OPPORTUNITY

Overall, the total foreign investment in 7MFY24 was reported at $785.94 million compared to a foreign divestment of $148.77 million in the previous year, indicating a recovery and potential for growth in Pakistan’s investment climate.

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