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Investors confidence in Pakistan drops to -4% due to political instability

Large multinational corporations with activities in many different industries in Pakistan have lost hope in Pakistan’s economy. The Business Confidence Score (BCS) overall dropped by 21 percentage points to a negative 4% over the previous six months.

The BCS score in the previous survey, which was carried out in March–April 2022, was 17% in favour. A “poor” opinion of the business environment in the previous six months was held by more than half of respondents (56 percent vs. 19 percent in the previous study).

 “Going forward, only a net 2 per cent (versus 18 per cent in the previous survey) were ‘positive’ for the next six months and 35 per cent of respondents cited no plans to invest,” according to the “Business Confidence Index Survey Wave 22” of the Overseas Investors Chamber of Commerce and Industry (OICCI), which was held from September to November 2022.

According to Express Tribune, the top three reasons for the recent decline in company confidence were political turmoil, currency depreciation, and rising fuel prices. The current energy crisis (high power bills) and weak commercial and trade policies rounded out the top five causes of the recent decline in business confidence.

The services sector saw a confidence drop of 24%, followed by the retail and wholesale trade sectors (both down by 22%) and the industrial sector (down by 20%). 25% of respondents worked in the retail and wholesale trade, followed by 33% in the services sector and 42% in the manufacturing industry.

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“The substantial decline in the overall business confidence to negative 4 per cent is regrettable but not surprising considering the highly challenging political and economic situation witnessed during the past six months,” OICCI President, Ghias Khan said in a statement.

“The record level of rains during August leading to severe flooding in Sindh and other parts of the country further restricted business activities,” he added.

“Foreign investors’ feedback could have been more positive but for serious concerns on a few critical issues like the undue delay in revising the pharma pricing and the extreme delays in overseas (outward) remittances for goods, services and dividends. Such actions are seriously counter-productive when trying to attract FDI (foreign direct investment) into the country,” Khan expounded.

Political upheaval, rising fuel prices, and currency depreciation are predicted to continue to be the key concerns impacting business confidence in the nation.

“These are challenging times. Authorities are doing all they can to navigate the situation, including controlling inflation, managing the economy with restricted availability of foreign exchange and other resource constraints,”OICCI Vice President, Amir Paracha noted.

“The key stakeholders, especially foreign investors, will continue to support the authorities in taking long-term policy measures to streamline the economic fundamentals, including fair taxation for all, and facilitate business and investment into the country,” he added.

The confidence index for business development (additional investment) plans over the next six months has declined to 18% from 34% in the previous survey/W21, according to the most current survey data.

Similarly, intentions for new capital investments fell dramatically to 2% for the upcoming six months (from 21 per cent in the previous wave).

Only 7% of respondents in Wave 22 compared to Wave 21 indicated an increase in overall employment. Nearly 11% of respondents reported a decline in overall employment over the past six months.

The trade organisation claims that OICCI represents the voice of significant foreign investors. Over 200 members, representing 31 nations, operate in 14 domestic economic sectors and provide more than one-third of Pakistan’s overall tax revenue.

The rupee dropped 0.02 percent (or Rs 0.05) on the interbank market on Wednesday, hitting a two-month low of Rs 224.16 against the US dollar.

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