Pakistan’s economic troubles are deepening, as energy giant Shell has declared plans to pull out from the country after a 75-year tenure. This represents a significant setback for the nation that’s currently grappling with the challenge of attracting investments to revitalize its economy. The withdrawal of such a major player could potentially initiate a trend for other foreign investors to reconsider their positions in Pakistan or even suspend their operations temporarily.
This move promises to exacerbate Pakistan’s journey towards financial recuperation. The nation, already suffering from a liquidity crunch, will face more hardship as companies retreat or minimize their local presence, leading to escalating unemployment levels.
Almost all global companies operating in Pakistan are experiencing enormous losses due to the sharp depreciation of the Pakistani rupee. Prior to Shell’s announcement, automobile manufacturer Honda had declared a halt to its operations.
As per the Daily Duniya report, Pakistan’s foreign direct investment (FDI) saw a significant decrease of 23 per cent this year, plummeting to $17 billion as opposed to the previous year. The majority of this FDI inflow was from China. However, in recent months, the uncertainty surrounding Pakistan’s political landscape has led to a reduction in China’s investments.
Further compounding the issue are the country’s import restrictions and rapidly diminishing foreign exchange reserves. The State Bank of Pakistan, the country’s central bank, has introduced strict regulations in an attempt to conserve foreign exchange reserves, making it exceedingly difficult for multinational corporations to remit dividends to their foreign shareholders.
The severe depreciation of the Pakistani rupee has also caused a substantial decrease in the value of these dividends.
An analyst points out that to attract foreign direct investment, Pakistan needs to offer a business-friendly climate, including political and security stability. However, the current circumstances in Pakistan are far from ideal. The analyst further expressed pessimism about the situation improving in the foreseeable future.
Ehsan Malik, the CEO of Pakistan Book Council (PBC), told the Express Tribune that delays in remittances portray a “highly unfavorable impression to prospective foreign investors.”