Editorial
Foreign direct investment (FDI) in Pakistan remains trapped in a cycle of hesitation and uncertainty. Despite its vast market and strategic potential, investors are increasingly cautious, weighed down by political instability, security risks, and inconsistent economic policies.
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According to the State Bank of Pakistan, net FDI dropped sharply by 34 percent year-on-year to $568.8 million in the first quarter of FY26, compared to $865 million in the same period last year. Total inflows fell to $886 million, down from $1.33 billion, while outflows eased slightly to $317 million. The downward trajectory persisted through September 2025, where inflows plunged by 50 percent to $306 million, resulting in net inflows of just $186 million — less than half of the previous year.
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The sectoral picture reflects a narrow base and weakening diversity. The power sector, long the mainstay of FDI, recorded only $244 million in net inflows, down from $548 million last year, while financial services attracted $180 million. Mining and IT saw limited activity, and the telecom sector suffered net disinvestment. China remained the largest investor with $189 million — a steep decline from $503 million last year — followed by Hong Kong, the UK, the UAE, and Switzerland, accounting for most inflows.
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The message from investors is clear: caution has replaced confidence. While lower outflows provided short-term relief, falling inflows signal waning trust in Pakistan’s reform pace. The fundamentals — a young population, location, and market opportunity — remain strong. Yet, without policy stability, regulatory clarity, and sustained reforms, foreign capital will keep approaching Pakistan’s economy with hesitation rather than commitment.
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