Foreign direct investment in Pakistan reaches $2.56 billion

Pakistan’s foreign direct investment (FDI) has improved by 88% in fiscal year 2020 to $2.56 billion with major investment coming in the power and telecommunication sectors from China and Norway respectively.

China has been the biggest net contributor to FDI coming into Pakistan with $844 million, followed by Norway with $402 million.

However, part of that 88% figure can be attributed to the major dip in FDI in fiscal year 2019 after CPEC projects had slowed down and the rupee depreciated, which made foreign investor wary to invest.

The FDI fell by 51% from $2.78 billion in fiscal year 2018 to $1.36 billion in fiscal year 2019.    

“There were multiple reasons for low FDI in fiscal year 2019. The rupee was depreciating while the phase first of CPEC completed and concerns were also raised after the new government came into power, which slowed down investment from China,” senior research analyst Karim Punjani said.

Investors are reluctant to invest in countries where currency is depreciating. This is because if foreign investors invest in a country and make 10% profit in local currency terms and the local currency depreciates by 12% during the year against dollar, then they would end up making a 2% loss on their original investment.

China is investing the power sector, especially in coal projects, where a $545 million investment has been made. Norway’s interest has been in telecommunication. NNISBP sets mandatory targets for banks to extend loans for housing sector

Meanwhile, the Oil and Gas Development Company Limited (OGDCL) claimed that it has discovered five new oil and gas reserves in Pakistan.

According to details, the five new oil and gas deposits were discovered in Kohat, Sukkur, Shakardara and adjoining areas in one month. The ARY News team reached out to the new oil reserves to find out the facts.

1040 barrels of crude oil, 47 million cubic feet of gas per day were extracted from the new reserves and the newly discovered reserves have been added to the national supply network

The oil and gas experts have discovered more potential reserves from different areas. The OGDCL has completed the survey and expedited the drilling work.

It is pertinent to mention here that the MOL group yesterday had announced the discovery of new oil and gas reservoir in district Kohat of Khyber Pakhtunkhwa province. According to a statement released by the company, the Mamikhel South-1 exploratory well successfully reached a total depth of 4,939m on May 23, 2020. Upon testing the well-flowed gas and condensate from Lockhart & Hangu formation

at a flow rate of 6516 BOEPD, with flowing well-head pressure of 4,476 PSI at 32/64” choke.

The TAL block is an oil field located in the Kohat district and this is the 13th discovery of MOL in Pakistan in 21 years.

Oil and Gas Regulatory Authority (OGRA) has increased the prices of imported LNG for gas companies. Prices have been raised by $0.35 per MMBTU for Sui Northern and by $0.40 per MMBTU for Sui Southern.

According to the notification issued by OGRA, the price of LNG for Sui Northern has been fixed at $6.47 per MMBTU and for Sui Southern at $6.67 per MMBTU for July.

Earlier in June, the price of imported LNG for Sui Northern was set at $6.12 per MMBTU and for $6.27 per MMBTU for Sui Southern.

Separately, amidst federal government’s special incentive for the construction sector, the State Bank of Pakistan (SBP) on Wednesday decided to set a mandatory target for banks to extend mortgage loans and financing for developers and builders.

According to a press statement issued by the central bank, the banks will be required to increase their housing and construction of building loan portfolios to at least 5 per cent of their private sector credit by the end of December 2021.

It said due to significant shortages in meeting the annual additional demand of housing facilities by its citizens, a huge shortfall of housing units has accumulated over the years in the country.  

Filling this gap is important to improve quality of living conditions for common people and construction of housing with linkages to dozens of allied industries offers substantial potential for boosting economic activities in the country.

This, however, requires considerable amount of financing to meet the investment needs of this sector. In Pakistan, bank financing for mortgages and housing construction is less than one per cent of GDP, which is one of the lowest in the region.

Banks have remained reluctant over the years to extend mortgage financing for various reasons. Keeping in view the need for housing and its contribution to the economy, GoP is aiming to increase the number of housing units manifold in the coming years and has recently announced several measures including commitment to remove hurdles in mortgage and construction financing.      

News Network International