{"id":36792,"date":"2026-09-01T04:15:29","date_gmt":"2026-09-01T04:15:29","guid":{"rendered":"https:\/\/gsrra.com\/?p=36792"},"modified":"2026-09-01T04:15:29","modified_gmt":"2026-09-01T04:15:29","slug":"pakistan-the-ebbing-of-foreign-investment-inflows","status":"publish","type":"post","link":"https:\/\/gsrra.com\/?p=36792","title":{"rendered":"Pakistan: The ebbing of foreign investment inflows"},"content":{"rendered":"\n

<\/a>The statistics released by the SBP (State Bank of Pakistan) on foreign private investment inflows, direct and portfolio, reveal an almost catastrophic drop in these inflows in the last two years.<\/strong><\/p>\n\n\n\n

The year 2024-25 saw the foreign private investment inflow fall from USD 2,467 million to USD 1,746 million, a fall of over 29 percent. Last year, the level fell further to USD 1,042 million, a further drop of 40 percent in relation to the previous year\u2019s level. Cumulatively, from 2023-24 to 2025-26, there has been a very big decline of 58 percent.<\/p>\n\n\n\n

The fall has occurred both in foreign direct investment and foreign portfolio investment. The former has fallen by 30 percent. There has been a transition in portfolio investment from a positive inflow of USD 119 million to an outflow of USD 594 million.<\/p>\n\n\n\n

Clearly, the last two years have witnessed a big loss of confidence among foreign investors in investing in Pakistan. A comparison of the inflows into Pakistan from different countries reveals a fall, more or less, from all major sources. The inflows from the major sources of China, Hong Kong, and Switzerland are lower by 28 percent, 37 percent, and 7 percent, respectively, in 2025-26 compared to the level in 2024-25.<\/p>\n\n\n\n

A comparison of the size of the inflow of foreign private direct investment in Pakistan is also undertaken with other developing countries. It is 0.4 percent of the GDP in Pakistan. This is very low compared to 4.2 percent of the GDP in Egypt, 3.7 percent of the GDP in Malaysia, 3.3 percent of the GDP in Thailand, and 1.5 percent of the GDP in Indonesia.<\/p>\n\n\n\n

However, Bangladesh also appears to be unsuccessful in attracting foreign direct private investment, with the level at 0.4 percent of the GDP, as in Pakistan.<\/p>\n\n\n\n

China is the country with the highest private investment in Pakistan. However, it is only 0.4 percent of the country\u2019s global private investment. Earlier, a decade ago, it had been much higher with investment in power generation projects in Pakistan. Similarly, the inflow to Pakistan from Hong Kong, the second largest investor, is only 1.1 percent of its global private investment.<\/p>\n\n\n\n

We turn now to an examination of the trends in foreign private direct and portfolio investment inflows to Pakistan over the last decade since 2015-16.<\/p>\n\n\n\n

There have been big ups and downs in these inflows. The largest total inflow of both direct and portfolio investment was in 2017-18 at almost USD 5 billion, equivalent to 1.5 percent of the GDP at that time.<\/p>\n\n\n\n

The inflow of direct investment was USD 2.8 billion, and that of portfolio investment was also large at USD 2.2 billion.<\/p>\n\n\n\n

The performance of the economy was exceptional in 2017-18. The GDP growth rate went beyond 6 percent, following two years with growth rates of above 4 percent. The end of 2016-17 had seen foreign exchange reserves reach USD 17.5 billion, providing import cover for more than three months.<\/p>\n\n\n\n

Also, there had been an investment boom and total investment had reached the peak level of 17 percent of the GDP. These factors had all contributed to a very buoyant stock market in 2016-17. Therefore, it is not surprising that foreign private investors found Pakistan to be an attractive location for their investment.<\/p>\n\n\n\n

The other exceptional year was 2020-21 with a total inflow of USD 4.6 billion. This year also witnessed a GDP growth rate of close to 6 percent.<\/p>\n\n\n\n

The years 2017-18 and 2020-21 stand in sharp contrast to recent years from 2022-23 onwards.<\/p>\n\n\n\n

Pakistan, in fact, came close to default in 2022-23, and there was large-scale devastation due to the floods of over USD 30 billion. Thereafter, the GDP growth rate has averaged only 2.3 percent. The level of domestic private investment has also come down sharply to a low of 12.7 percent of the GDP in 2025-26.<\/p>\n\n\n\n

Other factors are also at play in driving foreign investment away from Pakistan. Perhaps the single most negative development has been the emergence of a high level of incidents of terrorism once again in Pakistan. This has effectively retarded foreign investment in highly profitable ventures in projects like the Reko Diq in Balochistan. Also, given the deterioration in economic conditions, some multinational companies have been compelled to exit Pakistan. This includes big names like Procter & Gamble, ICI, and Shell.<\/p>\n\n\n\n

Clearly, this was a very negative signal for potential foreign investors.<\/p>\n\n\n\n

There is a need not only for a return of GDP growth to above 5 percent, but this should also reflect buoyancy in domestic investment due to improved prospects for higher profitability. This will need to be supported by a strong external balance of payments position, with foreign exchange reserves providing adequate import cover.<\/p>\n\n\n\n

The focus then ought to be first on identification of sectors in the Pakistan economy, which are likely to be relatively more attractive to foreign investors. Second, an appropriate set of incentives should be put in place for attracting foreign direct investment. These functions and steps need to be undertaken by the Special Investment Facilitation Council (SIFC), which has considerable flexibility in attracting foreign investment.<\/p>\n\n\n\n

The SIFC has identified a number of factors of comparative advantage in terms of attracting foreign investment. This includes Pakistan\u2019s geo-strategic location, enormous potential, network of economic and tech zones, skilled workforce, liberalized investment regime and modernised infrastructure landscape. However, these have not been conducive enough for higher foreign investment.<\/p>\n\n\n\n

The sectors on which there ought to be greater focus should be those which are popular globally for foreign investors and which can grow more rapidly in Pakistan. These include communications, semiconductors, renewable energy, metals, coal, oil, gas, software, IT Services and real estate.<\/p>\n\n\n\n

This focus for identification of potential projects should be supported by strong incentives to foreign investors. Many countries have opted for a 5- to 10-year tax holiday on profits from FDI projects. There should continue to be a provision for 100 percent equity ownership and a full profit repatriation guarantee. Also, there should be exemptions or very low customs duties and sales tax on imported machinery for projects by foreign investors in Pakistan.<\/p>\n\n\n\n

There is no doubt that one of the key market tests of Pakistan\u2019s future success will be a jump in the level of foreign direct and portfolio investment to close to 2.5 percent of the GDP. This will extend the technology frontier, enable absorption of the latest management and marketing techniques, and also lead to an overall improvement in the growth rate of the economy.<\/p>\n\n\n\n

Reference Link:- https:\/\/www.brecorder.com\/news\/40437275<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The statistics released by the SBP (State Bank of Pakistan) on foreign private investment inflows, direct and portfolio, reveal an almost catastrophic drop in these inflows in the last two years. The year 2024-25 saw the foreign private investment inflow fall from USD 2,467 million to USD 1,746 million, a fall of over 29 percent. […]<\/p>\n","protected":false},"author":1,"featured_media":7538,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"aside","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[26656,2076,24030,23734,34337,28595,11208,483],"class_list":["post-36792","post","type-post","status-publish","format-aside","has-post-thumbnail","hentry","category-sample-category","tag-capital-2","tag-economy-2","tag-fdi-3","tag-finance-2","tag-foreign-direct-investment","tag-inflow","tag-investment-2","tag-pakistan-2","post_format-post-format-aside"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/36792","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=36792"}],"version-history":[{"count":1,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/36792\/revisions"}],"predecessor-version":[{"id":36793,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/36792\/revisions\/36793"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/media\/7538"}],"wp:attachment":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=36792"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=36792"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=36792"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}