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FDI flows into Pakistan take a hit amid political turmoil

New Delhi, Dec 19: Pakistans political uncertainty has had an impact on the inflow of foreign direct investments (FDI). In November, Pakistans net FDI inflow stood at $81.8 million � a drop of 48 percent compared to $158.4 million in the corresponding month in 2021, State Bank of Pakistan data revealed. The chunk of inflow came into the financial business and power sectors, the data showed.

Besides China, Hong Kong, US, Netherlands and UAE remained the top sources.
The Chinese plutocrat primarily goes into funding the China-Pakistan Economic Corridor( CPEC). still, flux of finances from China too has been decelerating with the deteriorating profitability and security situation in Pakistan.

The falling FDI flux will be a cause for solicitude for policymakers, especially at a time when the country’s foreign exchange reserves at lower than$ 7 billion are just enough to support a month’s significance. As on December 9, Pakistan’s foreign exchange reserves stood at$6.7 billion.

” The brewing political extremity is directly linked to the security situation and the recent violence has added to the problem. China, its most important supporter and largest FDI source, is also decelerating down and reducing its investments,” a critic told India Narrative.” The result lies in structural reforms and drawing up the mess that isn’t going to be anytime soon. Their focus is on non-issues,” he added.

With general choices approaching, it’s doubtful that Islamabad will take any real decision to heal the frugality.

Notwithstanding the heightening profitable extremity, Pakistan after agreeing to roll back subventions in April is back with charities. In October, the Shehbaz Sharif government sculpted out a sizeable subvention program easing cheap power to export acquainted sectors.

Pakistan’s Finance Minister Ishaq Dar lately reduced petrol and diesel prices by( Pakistani) Rs 10 and Rs7.5 independently after the country’s former Finance Minister Miftah Ismail’s decision to raise prices and exclude subventions. The International Monetary Fund agreed to revive the$ 6 billion loan package only after Islamabad committed to increase tax on energy and exclude subventions.

The Express Tribune noted that rather of reining in expenditures and rolling back subventions, policymakers” appear to be doing the contrary.”

” This points towards the lost precedences of the government,” it said, adding that Dar will face an uphill battle in persuading the IMF, considering the country’s deteriorating fiscal health.

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