Pakistan witness sharp drop in FDI may face a serious dent in textile exports

According to the State Bank report, there is 80 percent decline in the FDI, in July FDI dropped to just $24 million from $119m in the same month last year.

With Pakistan facing sharp decline in FDI, it is likely to break the confidence of foreigners willing to invest, particularly while the neighbouring India looks more attractive with $28 billion FDI in 2013.

The government has already completed 14 months in power, in fact struggling hard to invite foreign investors. But the result seems extremely poor so far.

The current month is more troubled for the country as two large public rallies are in Islamabad, protesting and demanding wrap-up of the entire government and the parliament for fresh general elections. A bleak picture is visible from investors’ point of view.

According to Aamir Aziz, a manufacturer and exporter of textile goods, not only foreign investors but the foreign importers are also reluctant to place fresh orders for goods and services. The country may have to face a serious dent in textile exports. And it could get even worse if the uncertainty prevails for another two to four weeks.

The impact of uncertainty has already started reflecting in the exchange rate as the dollar crossed Rs100 without any shortage. Panic is visible in the inter-bank market while the importers feel that the greenback may rise further if uncertainty persists.

Dollar supply into Pakistan has dropped, and exporters are also in the race to cash the situation as they stopped to bring export proceeds, said Malik Bostan, chairman of the Exchange Companies Association of Pakistan.

There is a pressure mounting in the inter-bank market due to importers’ rush and exporters’ delay to furnish export proceeds, whereas the open market is better.

But the equity market is currently depressed as foreign investors have started leaving Pakistan.