Pakistan has witnessed a significant decline in Foreign Direct Investment (FDI) during the first six months of the fiscal year 2025-26, as net inflows dropped sharply by 43 percent year-on-year. According to the State Bank of Pakistan (SBP), net FDI totaled $808 million in H1 FY26, compared to $1,425 million in the same period last year.

The data reveals a worrying trend, with December 2025 reporting a net outflow of $135 million, reversing the $180 million net inflow recorded in November. Analysts attribute the decline to global economic uncertainties, regional instability, and domestic policy challenges that have impacted investor confidence.

FDI plays a crucial role in Pakistan’s economic growth, supporting job creation, infrastructure development, and technology transfer. The sharp reduction raises concerns about the country’s ability to attract foreign capital and sustain long-term growth targets.

Economic experts emphasize that Pakistan needs to create a stable policy environment, ensure timely regulatory approvals, and improve investor-friendly frameworks to restore confidence among international investors. Transparency, ease of doing business, and macroeconomic stability are cited as key factors for reversing the declining FDI trend.

The State Bank of Pakistan continues to monitor foreign investment flows and is expected to recommend measures aimed at attracting and retaining foreign capital. Policymakers are under pressure to present actionable strategies to support sectors that traditionally receive significant FDI, including telecommunications, energy, manufacturing, and IT services.

As Pakistan navigates these challenges, the government’s ability to stabilize the investment climate will be critical for achieving sustainable economic growth and maintaining a competitive edge in the region.