FDI inflows into Pakistan likely to increase: Asian Development Bank

ISLAMABAD: Foreign capital inflows into Pakistan are expected to increase during the fiscal year 2019-20, Asian Development Bank (ADB) said in its latest report.

According to ADB’s flagship economic publication, the Asian Development Outlook (ADO), the foreign direct investment should revive as investors’ confidence was restored with implementation of the International Monetary Fund (IMF) stabilization and reform program.

This should also help bring additional finance from multilateral institutions and other international partners, it added.

The report said that along with the activation of a Saudi oil facility with potential disbursements of $1 billion in the current fiscal year, these developments are expected to raise foreign exchange reserves to reach more than $10 billion by the end of FY2020.

During the fiscal year 2018-19, the report added, the financial account surplus narrowed considerably in by 16.2%, the $2.3 billion fall mostly accounted for by $1.8 billion less in foreign direct investment owing in part to policy uncertainty but also to the winding down of energy and infrastructure projects in the China–Pakistan Economic Corridor (CPEC).

Notwithstanding large bilateral financing received from the People’s Republic of China, Saudi Arabia, and the United Arab Emirates, gross foreign exchange reserves fell by $2.5 billion to $7.3 billion at the end of June 2019, or cover for 1.7 months of imports, it added.

The report while Indicating that Pakistan’s economy was showing signs of recovery owing to government’s fiscal consolidation and austerity measures, projected Pakistan’s GDP growth rate at 2.8 percent during the fiscal year 2019-20.

Though slower than the last fiscal year (2018-19), the growth rate projections by ADB are higher than the GDP target of 2.4 percent set by the incumbent government for the fiscal year 2019-20.

“Given the need for the authorities to address sizable fiscal and external imbalances, the economy is expected to slow further, with GDP growth projected at 2.8% in FY2020,” the ADO report said.