By Abdul Ghani

Pakistan’s total foreign investment increased to $204.5 million in July 2026 from $178.9 million a year earlier, as a turnaround in portfolio investment more than offset a decline in foreign direct investment (FDI).

According to the Finance Division’s Monthly Economic Update & Outlook – August 2026, available with Wealth Pakistan, net FDI stood at $178.6 million in July 2026, down from $223.5 million in the corresponding month of the previous year.

The decline in FDI was accompanied by a marked improvement in portfolio investment. Pakistan recorded a net portfolio inflow of $25.9 million during July, compared with a net outflow of $44.6 million in July 2025.

The shift represents a $70.5 million improvement in the portfolio investment balance compared with the same month last year. As a result, total foreign investment increased by $25.6 million year-on-year to $204.5 million.

The Finance Division reported gross FDI inflows of $304 million during July. After accounting for investment outflows, net FDI amounted to $178.6 million.

The figures show a mixed investment picture at the beginning of FY2027: direct investment declined year-on-year, while the reversal in portfolio flows lifted overall foreign investment above the level recorded in July last year.

The improvement came as Pakistan entered FY2027 on a stronger macroeconomic footing following fiscal consolidation and stabilisation efforts. The Finance Division said strengthened fiscal buffers, enhanced economic stability and improved growth prospects were supporting the broader economic environment.

Pakistan’s external position also showed resilience during July. Foreign exchange reserves stood at $22.6 billion as of August 21, including $17.1 billion held by the State Bank of Pakistan and $5.5 billion by commercial banks.

The exchange rate stood at Rs277.5 against the US dollar on August 28, 2026, compared with Rs283.8 at the end of June 2026, according to the economic indicators presented in the report.

The improvement in Pakistan’s macroeconomic fundamentals also received external recognition during August, when Moody’s upgraded the country’s rating to B3 from Caa1 with a stable outlook.

However, the Finance Division cautioned that risks remain from geopolitical uncertainty and global energy prices, which could affect inflation and the external account.

It stressed that continued prudent macroeconomic management and implementation of reforms would remain important to safeguard stability and sustain economic recovery into FY2027.

Credit: INP-WealthPk