Pakistan has seen a significant rise in Foreign Direct Investment (FDI), with net FDI reaching $214 million in August 2024. This marks a 51% increase compared to the $142 million recorded in August of the previous fiscal year (FY24). The sharp rise in FDI reflects growing investor confidence in the country, despite global economic challenges.
FDI inflows for August 2024 amounted to $296 million, representing a 46% jump from $204 million in August 2023. However, FDI outflows also saw an increase, reaching $82 million in August 2024, up 34% from $62 million in the same month last year. The balance of inflows and outflows demonstrates Pakistan’s continued ability to attract foreign capital while facing some capital flight.
On a broader scale, during the first two months of the fiscal year 2025 (2MFY25), net FDI inflows surged by 56% year-on-year, climbing to $350 million compared to $225 million in the same period in FY24. This consistent growth showcases Pakistan’s improving economic conditions, which are appealing to foreign investors, especially in key industries.
China remains Pakistan’s top foreign investor, contributing $175 million in FDI during the first two months of FY25. This is followed by significant investments from Hong Kong, which provided $70 million, and the United Kingdom, which contributed $44 million. Other notable sources of investment include the United States with $24 million and France with $13 million in FDI during this period. The strong interest from China, in particular, highlights the continued strategic economic partnership between the two nations, with key projects under the China-Pakistan Economic Corridor (CPEC) serving as a primary driver of Chinese investment.
Among the sectors receiving the most foreign direct investment, the power sector stood out as the top recipient, attracting $210 million in 2MFY25. This is indicative of Pakistan’s ongoing focus on improving its energy infrastructure to meet the needs of its growing economy. The oil and gas exploration sector followed, receiving $44 million, reflecting global interest in Pakistan’s natural resources. The financial business sector also attracted $39 million, indicating that Pakistan’s banking and finance industries are becoming more competitive and appealing to foreign investors. Finally, the electronics sector saw $23 million in FDI, pointing to a growing interest in technology and manufacturing in the country.
The rise in FDI inflows can be attributed to several factors. First, Pakistan’s improving macroeconomic indicators have contributed to better investor sentiment. Recent efforts to stabilize the currency, reduce inflation, and foster a more business-friendly environment have played a role in attracting international investment. Additionally, the government’s focus on economic reforms and infrastructure development has made Pakistan a more attractive destination for long-term foreign investment, particularly in the energy and manufacturing sectors.
Another contributing factor is the growing confidence of investors in Pakistan’s ability to overcome challenges related to political instability and economic uncertainty. While risks remain, the country’s long-term growth potential, coupled with its strategic location, makes it an appealing market for both regional and global investors.
Looking ahead, maintaining this upward trend in FDI will require the government to continue implementing reforms aimed at improving the ease of doing business, strengthening regulatory frameworks, and enhancing investor protection. Expanding investment opportunities beyond traditional sectors like energy and infrastructure could also diversify the FDI portfolio and create more sustainable growth.
The increase in foreign direct investment in August 2024 is a positive sign for Pakistan’s economy, providing much-needed capital to fuel growth and development. As the country works to build on this momentum, the focus will remain on creating a stable, investor-friendly environment that can sustain high levels of FDI in the long run.