Ayesha Saba

Foreign direct investment (FDI) and remittances are crucial to Pakistan’s economic strategy. By implementing targeted policies and improving the investment climate, Pakistan can leverage these financial inflows to promote sustainable growth and stability. Experts recommend that the government prioritize these areas to ensure long-term economic resilience. Talking to WealthPK, Junaid Ahmed, Senior Research Economist at the Pakistan Institute of Development Economics, emphasized that FDI was pivotal to driving economic growth, particularly in sectors such as telecommunications, energy, and manufacturing. “Pakistan remained trapped in a low-saving and low-investment situation, which has constrained its economic potential. The economic conditions remained discouraging for both domestic and foreign direct investment,” he said. He lamented that Pakistan could not instill confidence in the private sector, which only invested in markets it trusted. He stressed the need for institutions to help rebuild trust; otherwise, money and talent would continue to leave the country.

He further suggested, “We need to expand our market to the global firms with an environment that ensures a level playing field and encourages their participation through streamlined regulatory procedures, transparent tax and trade policies, and investment-friendly infrastructure.” “To achieve this objective, it is crucial to establish a comprehensive framework that not only attracts international investors but also nurtures their growth in the domestic landscape. “All industrial countries rely on engineering to create jobs, value-added exports, and import substitution. This type of investment should be our priority. We need to consider whether to welcome all sorts of investments or targeted investments to take it forward,” he added. Majid Shabbir, Policy Advisor at the Islamabad Chamber of Commerce and Industries, said Pakistan’s current policies on foreign investment were not very attractive. Availability, reliability, and cost of infrastructure facilities are essential ingredients of a business environment conducive to foreign investment.

He further said, “To boost economy through remittances, the government needs to focus on several key areas by reducing the cost of remittances, making the process more transparent, and increasing access to formal financial institutions such as banks. The way must be found to curb the informal inflow and outflow of foreign reserves if Pakistan is to see economic growth.” “The government should also encourage overseas Pakistanis to invest in the country and work with the private sector to provide investment opportunities in various sectors such as agriculture, tourism, and infrastructure development,” he suggested. The FDI increased by 17 percent in FY24 compared to the preceding year, though the amount remained the lowest in the region of developing economies. According to the SBP data, FDI inflows during FY24 reached $1.9 billion, up from $1.62 billion in FY23. The June inflows alone were $168.7 million, compared to $122.4 million in the same month a year ago.

Credit: INP-WealthPk