Pakistan is currently dealing with a significant foreign exchange crisis, driven by the pressure to repay around $4.8 billion of external debt, as reported by the Times of Oman. Foreign direct investment (FDI) in the country dropped by 33% in the fiscal year 2025-26 to $1.195 billion, down from $1.92 billion in 2023-24 and $1.83 billion in 2024-25, with FDI remaining below 0.45% of the GDP.
The report also highlighted a decline in investor confidence in Pakistan’s economy, leading to the exit and downsizing of several multinational companies in recent years. Despite government efforts to boost investor confidence through policy measures, the desired outcomes have not been achieved.
Notably, multinational corporations like Procter & Gamble have opted to cease manufacturing operations in Pakistan, while other companies such as Shell, Telenor, Uber, Yamaha, Eni, foreign banks, and pharmaceutical firms have either scaled down or closed their operations in the country. The report further mentioned that the unemployment rate in Pakistan has risen from 6.3% to 6.9% between 2020-21 and 2024-25, with women and youth being the most affected.
Pakistan’s economic challenges are evident from its soaring public debt, reaching Rs 80.52 lakh crore by the end of the fiscal year 2024-25, along with external debt and liabilities amounting to $138 billion. The country’s economic growth has averaged approximately 1.7% over the past three years, with the government’s debt constituting 70% of the GDP and facing high gross financing needs globally.
The report also noted that Pakistan’s economy is highly vulnerable to shocks from West Asia, as the nation heavily relies on fuel and fertilizer imports from the Gulf, constituting about 4% of its GDP annually. The heavy dependence on fuel, food, and remittances from West Asia and the Gulf has strained the economy, leading Islamabad to implement austerity measures such as school closures and reduced work weeks to address the oil crisis.
