Abdul Ghani

Pakistan attracted foreign direct investment (FDI) worth $927.4 million during the first five months of fiscal year 2025–26, reflecting renewed investor confidence and improving macroeconomic stability, according to the Monthly Economic Update and Outlook released by the Finance Division for December 2025.

The report stated that net foreign direct investment inflows during July–November FY2026 were supported by improved economic fundamentals, stabilization in the external sector and progress under the ongoing reform programme. Although FDI inflows remained lower than the previous year’s level, the continued inflow signaled growing investor interest in key sectors of the economy.

Sector-wise data showed that the power sector attracted the highest level of foreign investment, receiving $383.8 million during the period. The financial services sector followed closely with inflows of $327.6 million, reflecting growing confidence in Pakistan’s banking and financial system. These two sectors together accounted for a significant share of total foreign investment, underscoring their importance in the country’s economic landscape.

In terms of source countries, China emerged as the largest investor, contributing $308.4 million during the period under review, while other countries also contributed to the overall investment inflows, reflecting a diversified investment base.

The report noted that while net FDI remained positive, portfolio investment flows continued to face pressure. Portfolio investment recorded a net outflow of $192.2 million during July–November FY2026, reflecting global financial market volatility and cautious investor sentiment toward emerging markets. Public sector portfolio investment also registered outflows, amounting to $421.6 million during the same period.

Despite these challenges, the overall investment environment showed signs of gradual improvement, supported by better macroeconomic stability, easing inflationary pressures and progress on structural reforms. The report highlighted that sustained policy consistency and improved ease of doing business would be crucial for attracting higher levels of long-term foreign investment.

The Finance Division emphasized that continued efforts are being made to improve the investment climate through regulatory reforms, facilitation measures and enhanced investor protection mechanisms. These initiatives aim to strengthen investor confidence, attract diversified investment inflows and support long-term economic growth.

The report further noted that maintaining macroeconomic stability, ensuring policy predictability and accelerating structural reforms would remain key to sustaining foreign investment inflows in the coming months. The government reiterated its commitment to improving the business environment and enhancing Pakistan’s attractiveness as an investment destination.

Credit: INP-WealthPk