Pakistan’s investment-to-GDP ratio falls to record low 13.1 pc: Report

New Delhi, June 29 (IANS) Pakistan’s investment-to-GDP ratio has fallen to a historic low of 13.1 per cent in 2024 from an average of around 18 per cent over nearly four decades, while foreign direct investment (FDI) has halved to 0.5 per cent of GDP, a report has said.

According to an analysis published in Dawn, the country’s declining investment reflects a widening disconnect between its ambitious economic targets and the policy environment.

Pakistan’s investment-to-GDP ratio declined from 17.2 per cent in 2018 to 15.5 per cent in 2019 following the start of the International Monetary Fund (IMF)-backed stabilisation programme, before falling further to a record low of 13.1 per cent in 2024, according to the report.

During the same period, FDI dropped from around 1 per cent to 0.5 per cent of GDP.

In addition, policy uncertainty, high real interest rates and a contractionary taxation regime have discouraged long-term investment despite the government’s stated objective of achieving annual economic growth of 6-7 per cent under its economic transformation plans.

The report further highlighted that businesses require a predictable policy framework to make long-term investment decisions, warning that inconsistent policies tend to encourage speculative activity while reducing investors’ risk appetite.

Up to 80 per cent of companies had delayed or revised investment decisions because of rising economic uncertainty, it added.

According to the analysis, Pakistan’s average economic growth has remained at 2.7 per cent since 2019, compared with an average of 5.5 per cent during 2003-2018.

It also referred to World Bank estimates showing that Pakistan’s poverty rate has risen to about 25.3 per cent after declining to 21.9 per cent in 2018.

Using the World Bank’s lower-middle-income poverty benchmark, the analysis said nearly 45 per cent of Pakistan’s population falls below the poverty threshold.

It also showed that Pakistan’s public debt has increased from Rs 29.9 trillion in 2018 to Rs 95.5 trillion (Pakistani rupee), while interest payments now account for almost 70 per cent of the federal government’s net revenues.

–IANS

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