Pakistan sees 28 pc drop in FDI as geopolitical risks persist: Report

New Delhi, June 30 (IANS) Pakistan’s foreign direct investment (FDI) fell 28 per cent during the first 11 months of FY26 as persistent regional uncertainty and geopolitical tensions continued to weigh on investor sentiment, a report has said.

The report published in Dawn showed that regional instability has negatively impacted Pakistan’s domestic bond and equity markets, with uncertainty prompting foreign investors to stay away despite an improvement in the country’s foreign exchange reserves and remittance inflows.

Domestic bond markets recorded a net outflow of $550 million during the period, while total outflows from domestic bonds exceeded $2 billion, it added.

In addition, the Pakistan Stock Exchange failed to attract sustained foreign investment in the outgoing fiscal year.

The report further noted that between July 1, 2025, and June 19, 2026, foreign inflows into the equity market stood at $308 million, while outflows crossed $1 billion.

It said that uncertainty surrounding developments in West Asia — particularly the conflict involving Iran — has made foreign investors more cautious towards economies such as Pakistan that remain vulnerable due to external financing requirements, adding that the country continues to face external sector challenges.

The country is projected to make external payments of more than $26 billion in FY27, while its trade deficit during the first 11 months of FY26 stood at about $35 billion.

Investors remain cautious as geopolitical uncertainty continues to cloud Pakistan’s investment outlook, the report said.

Separately, another report said that the country is expected to face a sharp decline in one of its largest sources of non-tax revenue, with profit transfers from the State Bank of Pakistan (SBP) to the federal government expected to fall by nearly 41 per cent in FY27 as easing inflation and lower interest rates reduce the central bank’s earnings, according to a report.

According to an analysis by Pakistan Observer, the SBP’s profit transfer is estimated to decline to PKR 1.44 trillion in FY27 from PKR 2.43 trillion in FY26, a drop of almost PKR 1 trillion.

–IANS

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