Foreign Direct Investment in Pakistan Drops 34% in 1QFY26

Foreign direct investment (FDI) in Pakistan fell sharply by 34% in the first quarter of fiscal year 2026, according to data released by the State Bank of Pakistan on Monday. The country attracted $568.8 million in FDI during July-September, down from $864.6 million in the same period last year. Total FDI inflows for the quarter stood at $886 million, compared to $1.32 billion a year earlier, reflecting persistent investor caution amid ongoing global and domestic economic challenges. The decline highlights subdued investor confidence, despite recent signs of macroeconomic stabilization. Portfolio investment also remained weak, with net outflows of $121.5 million in the first quarter, as foreign investors engaged in profit-taking and activity in Pakistan’s equity and debt markets remained limited. Consequently, net foreign investment turned negative, standing at $64.5 million during July-September FY26, compared with a net inflow of $997 million in the same period last year. On a month-on-month basis, FDI in September 2025 was $185.6 million, less than half the $417.4 million recorded in September 2024. While Pakistan’s external position has improved on the back of a narrower current account deficit and stronger remittance inflows, analysts say the continued weakness in FDI and portfolio investment highlights the need for greater policy consistency, an improved business climate, and political stability to attract long-term capital.