By Staff Reporter
KARACHI: The foreign direct investment tumbled 22% in the first two months of the fiscal year, signalling persistent challenges in attracting capital amid economic headwinds and a sharp retreat from its largest investor.
According to the State Bank of Pakistan, the country received $364.3 million in foreign direct investment during July-August of fiscal 2026, compared with $467 million in the same period a year earlier, reflecting a decline of $103 million.
The drop underscores broader investor caution in emerging markets, where geopolitical tensions and fiscal strains have curbed appetite for riskier bets. Gross inflows of foreign direct investment fell 16% to $560 million, while outflows eased 2% to $196 million over the period. On a month-on-month basis, investment contracted sharply by 43%, sinking to $156 million in August 2025 from $272.4 million in August 2024.
China, long Pakistan’s biggest source of foreign capital, remained in the top spot but contributed just $120 million during the opening two months of fiscal 2026. That marked a steep decline from $254 million in the year-earlier period.
Hong Kong ranked second with $60 million in investment for July-August of fiscal 2026, down from $86 million in the corresponding stretch of the prior fiscal year. The investment slowdown extended beyond direct flows. Foreign portfolio investment also followed a downward trajectory, recording a net outflow of $75 million in July-August of fiscal 2026, compared with an inflow of $25 million in the same period of fiscal 2025.
As a result, net foreign investment — encompassing foreign direct investment, portfolio investment and foreign public investment — plunged 51%, or $292 million, to $278 million in the first two months of fiscal 2026, down from $570 million a year earlier.
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