Int'l investors perceive Pakistan as country with high debt default risk
May 26, 2022
Islamabad [Pakistan], May 26 : Pakistan is now perceived by the International investors as a country with high default risk at a time when the foreign exchange reserves by the State Bank of Pakistan (SBP) are down from USD 20 billion in August 2021 to USD 10.1 billion in nine months.
The upsurge in Pakistan's default risk (which means that it is unable to pay its debt) is also marred by the country's bad politics.
The surge in default risk damages a country's reputation with international investors. Moreover, it makes it prohibitively expensive to borrow and it wrecks confidence in the country's currency, reported The News International.
The same scenario prevails in the island nation of Sri Lanka where on May 18, the nation was unable to pay USD 78 million in debt interest payments and went into default for the first time in Sri Lanka's history.
Meanwhile, the year-on-year Foreign Direct Investment data draws a sharp contrast between India's highest ever FDI of USD 83.57 billion for the current year with Pakistan's 2022 flat foreign investment inflows.
The FDI situation in Pakistan is a sob story. Though Pakistan has recorded month-on-month growth of over 660 per cent in April 2022, year-on-year growth reveals the country's sorry state of affairs.
A look at year-on-year numbers reveals that foreign direct investment in April 2022 increased marginally by only 0.9 per cent versus April 2021 and overall, the FDI in the first ten months of the Fiscal Year 2022 reduced by 1.6 per cent year-on-year, reported Business Recorder.
Apart from the net FDI in April 2022 flat growth over the previous year with a small base, the inflows in April were also down by 21.6 per cent and outflows down by 89.6 per cent year-on-year.
This suggests that the total inflows coming in April 2022 were also down which is definitely not a good sign for FDI in Pakistan.
The same is also visible in the overall FDI in FY22 so far. During the first ten months of Fiscal Year 2022, inflows of foreign investment were down by 16.2 per cent, while outflows were down by 35.81 per cent, year-on-year.
The overall picture of the foreign investment in the country has not changed much over a long time, especially since inflows from China started declining after key CPEC projects were over.
Also, the lack of diversification and failure to increase export-oriented FDI are other factors pulling down FDI in Pakistan, as per the media portal.
Additionally, there has been a decline in annual FDI flows, but FDI stocks are also decreasing where ease of doing business and taxation policy also creates a hindrance, as per the media portal.
