Pakistan’s foreign direct investment (FDI) has declined by 28% in the first 11 months of FY26 due to ongoing regional uncertainty and geopolitical tensions, as per a report in Dawn. The report highlights that regional instability has adversely affected Pakistan’s domestic bond and equity markets, deterring foreign investors despite improvements in foreign exchange reserves and remittances. During this period, domestic bond markets saw a net outflow of $550 million, with total outflows surpassing $2 billion.
The Pakistan Stock Exchange struggled to attract consistent foreign investment in the previous fiscal year. Foreign inflows into the equity market between July 1, 2025, and June 19, 2026, amounted to $308 million, while outflows exceeded $1 billion. The report attributes this trend to uncertainties in West Asia, especially the conflict involving Iran, which have made foreign investors more cautious towards economies like Pakistan with external financing vulnerabilities.
The report projects that Pakistan faces external payments exceeding $26 billion in FY27, with a trade deficit of about $35 billion in the first 11 months of FY26. Geopolitical uncertainties persist, casting a shadow on Pakistan’s investment landscape, leading to cautious investor sentiment. Additionally, a separate report anticipates a substantial drop in non-tax revenue for Pakistan, with profit transfers from the State Bank of Pakistan to the federal government expected to decrease by nearly 41% in FY27.
