Pakistan’s Foreign Direct Investment (FDI) has continued its upward trajectory, recording a robust 56 percent growth in the first seven months of the current fiscal year (FY25). According to the latest figures from the State Bank of Pakistan (SBP), the country attracted a total of $1.523 billion in FDI between July and January, a significant jump from the $976 million recorded during the same period in FY24. This surge in foreign investments represents an impressive increase of $548 million, showcasing growing investor confidence in Pakistan’s economic outlook.
During the first half of FY25, the total FDI inflows amounted to $2.122 billion, surpassing the outflows of $599 million by a considerable margin. This positive net flow highlights a strong rebound in foreign investment, despite the backdrop of global economic uncertainties and challenges. Analysts suggest that this substantial rise in FDI is a reflection of renewed confidence from international investors, driven by Pakistan’s improving economic prospects and favorable market conditions.
Analysts believe that the increase in FDI is a promising sign for the country’s economic recovery. The surge in foreign investments has been attributed to multiple factors, including the government’s economic reforms, stabilizing inflation rates, and improving business environments. Experts also note that foreign investors are increasingly optimistic about Pakistan’s long-term potential, particularly in sectors like manufacturing, energy, and infrastructure, which have attracted significant interest.
However, while FDI has shown remarkable growth, other forms of foreign investment, particularly portfolio investments, have faced challenges. The SBP reported a net outflow of $232 million in portfolio investments during the July-January period of FY25, despite the performance of the equity market showing improvements. This downturn in portfolio investments suggests that, while long-term investments are on the rise, short-term speculative investments remain cautious, reflecting global market uncertainties and volatility.
Looking at FDI trends on a month-to-month basis, January 2025 saw a notable recovery, with FDI inflows reaching $194 million. This was in stark contrast to January 2024, which had recorded an outflow of $132.3 million, marking a significant reversal in foreign investment sentiment. This reversal in January underscores a growing optimism and renewed foreign interest in Pakistan’s economic recovery, suggesting that the country’s economic fundamentals are seen as increasingly favorable.
When considering total foreign investment, which includes FDI, portfolio investment, and foreign public investment, there was a year-on-year increase of 25.6 percent. Total foreign investment reached $1.346 billion during the July-January period of FY25, up from $1.072 billion during the same period in FY24. This collective increase signifies a more diversified foreign investment landscape in Pakistan, with foreign investors participating in multiple sectors of the economy.
The rise in FDI, while positive, remains an important indicator of the broader health of the economy. For Pakistan, the continued growth in foreign investments will be vital in supporting the country’s economic recovery, providing essential capital for key sectors, and enhancing overall economic stability. It is clear that as the fiscal year progresses, Pakistan is on a path toward strengthening its position as an attractive investment destination for global investors.
This positive momentum in foreign investment underscores Pakistan’s potential as a growing market in South Asia, offering ample opportunities for investment in key industries and infrastructure projects. However, sustaining this momentum will require continued focus on improving the business environment, streamlining regulatory processes, and ensuring that the economic fundamentals remain strong to attract further investment in the coming months.