Key Takeaways
- Net FDI in Pakistan fell to $1.64 billion in FY26, down 34% from the previous year.
- Weakness was evident on both inflows and outflows, with gross inflows declining by 16.4%.
- China remained Pakistan’s largest source of FDI but saw a decline in net investment.
Foreign direct investment (FDI) in Pakistan continued to weaken in fiscal year 2025-26, with provisional data from the State Bank of Pakistan (SBP) showing that net FDI fell to $1.64 billion, a decrease of 34% compared to the previous year’s figure of $2.48 billion.
The decline was not isolated; both gross inflows and outflows showed significant changes. Gross inflows declined by 16.4% to $3.57 billion from $4.27 billion, while outflows increased by 7.8% to $1.93 billion from $1.79 billion.
June marked a particularly disappointing month for FDI in Pakistan, with net FDI standing at just $13.5 million. Inflows of $294.4 million were almost entirely offset by outflows of $280.9 million, indicating the volatility and lack of sustained momentum in foreign investment.
China remained Pakistan’s largest source of FDI but saw a decline in net investment to $862 million from $1.2 billion in FY25. Investment from Hong Kong fell to $339.4 million from $470 million, while net flows from the UAE declined to $235.9 million from $294.3 million.
Together, China, Hong Kong, and the UAE accounted for nearly 88% of Pakistan’s net FDI in FY26, highlighting a long-standing concern: foreign investment remains heavily concentrated in a small number of countries. Positive inflows from Switzerland, the United Kingdom, Kuwait, and Japan were not enough to offset weaker flows from major investors and sizeable withdrawals elsewhere.
The United States recorded a net outflow of $156 million during FY26, while Norway posted a much larger net outflow of $364.7 million. In June alone, the United States recorded a net outflow of $164.5 million, more than offsetting the combined $90.6 million received from China, Hong Kong, and the UAE.
The longer-term trend is even less encouraging. Pakistan’s annual net FDI remains far below the levels seen around FY2007 and FY2008, when it exceeded $5 billion. Today, net FDI of around $1.6 billion is simply not enough to meaningfully expand productive capacity, exports, and employment.
Macroeconomic stability may have reduced the fear of an immediate crisis, but stability alone does not bring investment. Investors also need policy consistency, predictable taxation, reliable energy, smooth profit repatriation, contract enforcement, and a clear long-term economic direction. Pakistan continues to struggle on many of these fronts.
