By Qudsia Bano

Pakistan's foreign direct investment declined by around 34% in FY2025-26, urging efforts to reduce regulatory friction and extend investment facilitation beyond initial approvals to the day-to-day financial operations of foreign companies.

State Bank of Pakistan data show net FDI fell to about $1.64 billion in FY2025-26 from $2.48 billion a year earlier. China nevertheless remained Pakistan's largest investor, contributing about $862 million, or nearly 53% of the total.

In July 2026, the first month of FY2026-27, Pakistan received $178.6 million in net FDI, of which China accounted for $63.2 million.

Pakistan has been pursuing a series of measures to improve the investment environment. The Board of Investment (BOI) states that foreign investors may repatriate profits, dividends and disinvestment proceeds subject to State Bank procedures, while the Special Investment Facilitation Council (SIFC) is mandated to provide single-window investment facilitation.

Regulatory simplification has also accelerated in recent months. The Cabinet Committee on Regulatory Reforms recently reviewed a fifth reform package aimed at removing overlapping requirements, while in August the government assigned the SIFC a stronger role in advancing regulatory reforms.

The Business Facilitation Centre Islamabad reported on August 24 that it had handled 7,709 applications in its first year, issuing 6,896 registrations, licences, certificates and other permits, and facilitating investment exceeding Rs6.6 billion.

Experts say these measures can be complemented over time by focusing more on the post-establishment operational requirements of foreign, including efficient management of corporate liquidity across multinational groups.

In this context, China's latest reform of cross-border corporate fund management provides a potential reference for Pakistan, particularly given China's position as the country's largest source of FDI.

The People's Bank of China and the State Administration of Foreign Exchange announced in August the nationwide rollout of centralised operation and management of cross-border renminbi and foreign-currency funds for multinational companies, with the policy taking effect on September 14, 2026.

The framework allows multinational groups to centrally manage domestic and overseas funds in renminbi and foreign currencies, pool foreign-debt and overseas-lending quotas of member companies, determine how much liquidity to centralise, and conduct centralised receipts, payments and net settlement for current-account transactions through designated accounts.

China's regulators said the programme had already registered more than 260 multinational companies by the end of June 2026, benefiting more than 5,500 member companies at home and abroad.

The new rules also introduce a single-window registration mechanism through local foreign-exchange branches and allow cooperating banks to process certain registration changes, while retaining ongoing and post-transaction supervision of cross-border capital flows.

Waqas Ghani, Head of Research at JS Global, told Wealth Pakistan that China's cash-pooling model demonstrated how investment facilitation could continue after an investor entered a market.

For multinational manufacturers operating several subsidiaries, he said, moving surplus liquidity within a group could minimize idle cash, lower dependence on short-term borrowing, and streamline transaction-level approval processes.

Ghani said Pakistan could initially consider testing a tightly regulated version for export-oriented multinational groups, CPEC-linked industrial ventures or companies operating in special economic zones.

Such a pilot, he said, should be tied to clear eligibility thresholds, real economic activity, bank-level due diligence and digital reporting to ensure that greater efficiency in liquidity management did not weaken foreign-exchange oversight.

Pakistan did not need to replicate China's model wholesale, Ghani said. A more practical approach could involve creating a controlled cross-border treasury window under SBP supervision, integrating relevant approvals with BOI and SIFC facilitation and, where appropriate, moving from repeated pre-approvals towards risk-based monitoring and post-transaction verification.

He said such an approach could complement Pakistan's existing investment-facilitation reforms by making legitimate corporate financial operations more efficient while maintaining appropriate regulatory oversight.

Credit: INP-WealthPk