Pakistan’s investment landscape is navigating a period of significant contraction, as Foreign Direct Investment (FDI) inflows dropped by over 33 percent during the first eight months of the current fiscal year 2025-26. Data released by the State Bank of Pakistan (SBP) on Monday reveals that cumulative FDI fell to $1.19 billion, down from $1.79 billion during the same period in FY25. This 33.51 percent decrease highlights the persistent challenges in attracting long-term foreign capital amid global economic volatility and domestic policy adjustments.
Despite the sober cumulative figures, February 2026 offered a glimmer of resilience. FDI for the month rose to $213.5 million, a notable jump from the $132.7 million recorded in February last year. Analysts at Topline Securities suggest that if this monthly momentum continues, the total FDI for the full fiscal year could potentially reach $2.5 billion. This optimistic outlook depends heavily on whether the positive trends seen in the power and financial sectors can be sustained through the remaining months of the year.
The broader investment climate, however, remains weighed down by consistent portfolio outflows. During the July–February period, the country’s stock market experienced portfolio outflows totaling $365.6 million, an increase from the $253.6 million seen in the previous year. Similarly, government securities recorded an outflow of $125 million, a sharp reversal from the modest inflows witnessed in FY25. Total private foreign investment also mirrored this downward trend, falling to $829 million from $1.54 billion, while combined private and public investment dropped to $704 million.
Sector-wise, the Power, Electronics, and Financial Business industries emerged as the primary magnets for capital during February. The largest geographical contributors to these inflows were China, Hong Kong, and Switzerland. This concentration of investment underscores Pakistan’s reliance on traditional partners and strategic infrastructure sectors. While the February uptick in private foreign investment and a $51.2 million inflow into government debt securities are positive indicators, they serve as a stark contrast to the overall fiscal year trajectory.
The current data underscores the urgent need for policy stability to restore international investor confidence. While the recovery in February provides a much-needed positive signal to the markets, analysts emphasize that reviving sustained inflows will require a more predictable regulatory environment. Strengthening Pakistan’s financial markets remains a priority for the SBP and the government as they work to counter the second-round effects of global uncertainty and secure the external account for the remainder of FY26.
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