KARACHI, PAKISTAN: Pakistan’s foreign direct investment (FDI) has suffered a sharp decline at the onset of FY26, raising concerns over the country’s ability to attract and sustain global capital. According to fresh data from the State Bank, FDI plunged by 22 percent during July and August, falling to $364 million compared to $467 million in the same period last year.
The setback was even more severe in August, when inflows dipped by nearly 43 percent, dropping from $272 million in August 2024 to just $156 million this year. Analysts say the decline highlights a growing sense of caution among international investors, who continue to view Pakistan as a high-risk destination despite government promotion efforts.
Industry voices point to persistent challenges—soaring business costs, erratic tax structures, weak utility supply, and deep-rooted policy inconsistencies. Textile exporter Aamir Aziz warned that local and foreign investors alike are now exploring more stable alternatives, with some shifting expansion plans to Malaysia.
On the reserves front, the State Bank recorded a minor improvement, with foreign exchange reserves inching up by $21 million in the week ending September 12, standing at $14.357 billion. Total liquid reserves were reported at $19.735 billion, offering some cushion but failing to offset the grim investment outlook.
The steep fall in FDI underscores a widening gap between official investor-friendly rhetoric and on-ground realities. Unless urgent structural reforms are implemented, Pakistan risks further alienating foreign investors at a time when regional competitors are successfully drawing sustained capital inflows.
This story has been reported by PakTribune. All rights reserved.