Foreign investment rises to $4.37bn in FY14,Highest since 2008-09

[farhan_9909]

KARACHI: Foreign investment rose to $4.377 billion in the previous fiscal year, the highest amount since 2008-09, the State Bank said on Tuesday.

In FY09, the country received a total foreign investment of $2.665bn.

However, the sudden rise in the total foreign investment was due to $2.1bn investment in the Eurobond. If this amount is deducted, the total foreign investment reduces to around $2.2bn, of which foreign direct investment was of $1.631bn. This is not a big change compared to FY2012-13’s figure of $1.456bn.

It shows the country still has an image problem in the international market; though it responded enthusiastically to Eurobond mainly because of very high return.



The Eurobond narratives



Experts and economists believe that despite high return the selling of Eurobonds boosted the sentiment for Pakistan as bilateral and multilateral donors extended loans at reasonable rates.

The borrowing increased the foreign exchange reserves of the SBP to more than $9bn from $2.5bn a year ago.

As fears about Pakistan’s ability to pay back loans disappeared, the IMF, World Bank and others encouraged to extend loans. Another major change was the strengthening of local currency against the US dollar as the rupee gained more than nine per cent in the second half (January-June) of the last fiscal year.

Higher reserves played a key role in the strengthening of economy, particularly they helped improve the balance of payments.

The IMF has recently reported positively for the economy while Moody’s also upgraded its outlook for Pakistan’s foreign currency government bonds to stable from negative.

Traders and industrialists believe that the recent military operation against terrorists in the north of Pakistan would help improve the country’s image tarnished by the terrorism across the country.

However, the government has not yet succeeded to improve its capacity to deal with crises like energy shortage, terrorism and deteriorating law and order situation.

Published in Dawn, July 16th, 2014

Foreign investment rises to $4.37bn in FY14 - Newspaper - DAWN.COM

 

[farhan_9909]

I believe the highest ever Foriegn investment Pakistan ever recieved was upto 7billion dollars and in 2007.

Considering the Growth rate,I believe it would be safe to assume that our Foriegn investment will surpass 8billion dollars mark this year

 

[ajpirzada]

is any of you asking the question where did all this investment go? why we ended up with a lowest growth rate? afterall 11% is a big increase.

Obviously, the govt borrowing from the Euromarket is put under the heading of FDI (under capital inflows). In other words, whatever increase in inflows (from euro borrowing) we are seeing today will be an outflow tomorrow (when we pay it back).

Ignoring all of the above, the least figure you must be interested in a static environment should not be FDI but net FDI. In another article it said that the growth in net FDI has only been 2.5% which better reflects the growth rate of the economy (3.3%).

so in short, the increased FDI, falling dollar, rising reserves is nothing but government borrowing of different types from international lenders. atleast nothing to be happy about if not panic about future debt servicing!

 

[SBD-3]

is any of you asking the question where did all this investment go? why we ended up with a lowest growth rate? afterall 11% is a big increase.

1-The capital formation or FDI is a leading indicator of economic growth -Macroeconomic Growth 101-, It is because the investment has a lead time to start yielding returns.
2- FDI comprises of two components a)Fresh Investment b)Reinvestment of repatriation eligible profits which may be driven by host of other factors than just business prospect.

Obviously, the govt borrowing from the Euromarket is put under the heading of FDI (under capital inflows). In other words, whatever increase in inflows (from euro borrowing) we are seeing today will be an outflow tomorrow (when we pay it back).

Borrowing of a) Any kind b) by the sovereign is NOT considered as a part of FDI.

Ignoring all of the above, the least figure you must be interested in a static environment should not be FDI but net FDI. In another article it said that the growth in net FDI has only been 2.5% which better reflects the growth rate of the economy (3.3%).

Net FDI includes adjustment for depreciation, dilution and other items. A positive Net FDI depicts fresh inflow in the economy over the replenishment costs.

so in short, the increased FDI, falling dollar, rising reserves is nothing but government borrowing of different types from international lenders. atleast nothing to be happy about if not panic about future debt servicing!

Having cushion does help, even if its through debt. If you're point is valid then Moody wouldn't have upgraded Pakistan's debt outlook from negative to stable. The overall structural overhaul takes a considerable amount of time and short term cushions come handy when doing so