Foreign investment in Pakistan’s treasury bills showed signs of fatigue in early February 2026 after posting strong inflows in January, according to the latest data released by the State Bank of Pakistan. As of February 6, no new foreign inflows were recorded in T-bills, while the market registered a net outflow of $22.5 million during the period, signaling a pause in overseas appetite for short-term government securities.
The slowdown comes on the heels of a robust January performance, when T-bills offering returns of up to 10 percent attracted $176 million in foreign capital. The high yields, combined with relative exchange rate stability, had positioned Pakistan’s short-term debt instruments as an attractive play for international investors navigating global financial uncertainty. However, the absence of fresh investment in the first six days of February suggests a shift in momentum, potentially influenced by changing global risk dynamics and cautious portfolio rebalancing.
Data for July to January of fiscal year 2026 indicates that cumulative foreign inflows into T-bills reached $732 million, while outflows during the same period stood at $499 million. This means roughly 68 percent of invested funds exited the market over the seven-month window, underlining the short-term and tactical nature of these portfolio allocations. The pattern reflects how foreign investors often use emerging market debt instruments for yield enhancement while maintaining flexibility to exit amid evolving macroeconomic conditions.
A breakdown of inflows shows that the largest contributions during July-January originated from the United Arab Emirates at $225 million, followed by Bahrain with $174 million, the United Kingdom with $171 million, and the United States at $61 million. Combined, the two Gulf countries accounted for approximately $400 million of the total inflows, highlighting sustained interest from regional investors in Pakistan’s fixed-income instruments during the period.
In the longer-duration segment, Pakistan Investment Bonds recorded comparatively modest activity. Between July and January FY26, inflows into PIBs totaled $53 million against outflows of $15 million. Similar to T-bills, no foreign inflows into PIBs were registered in early February, reinforcing the broader pause in external portfolio activity.
Market observers attribute January’s surge primarily to currency stability and the appeal of high-yield government securities at a time when global markets were navigating volatility and uncertain monetary policy trajectories. Pakistan’s comparatively elevated yields created a differential that drew in capital seeking short-term gains. However, analysts point to shifting risk appetite, external volatility, and evolving global liquidity conditions as factors influencing the February slowdown.
Some experts also suggest that overseas Pakistanis may represent a portion of these portfolio inflows, leveraging short-term government instruments to secure competitive returns. Such flows, while supportive in the near term, tend to be sensitive to macroeconomic signals and international market developments.
The deceleration in portfolio flows aligns with weaker trends in foreign direct investment. FDI declined by 43 percent in the first seven months of FY26, falling to $808 million compared to $1.425 billion in the same period last year. The combined moderation in both portfolio and direct investment inflows underscores the broader challenge of sustaining external capital momentum amid global uncertainty and domestic economic adjustments.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.