Pakistan’s efforts to lure foreign capital suffered a major setback in the first half of the current fiscal year, as overseas investment flows weakened sharply amid rising geopolitical tensions in the region. Foreign direct investment (FDI) fell by 43 per cent between July and December of FY26, raising concerns about the sustainability of external financing.
Official data shows that total FDI during the six-month period stood at $808 million, a steep decline from $1.425 billion recorded in the same period last year.
The strain on investor sentiment became especially visible in December, when net FDI slipped into negative territory. Although inflows reached $322.5 million during the month, outflows exceeded this at $457.3 million, leading to a net outflow of $135 million.
Analysts cautioned that any further escalation involving Iran could disrupt Pakistan’s trade routes and deepen investor reluctance.
Despite the overall decline, China remained Pakistan’s largest source of foreign investment, contributing $423 million during the six-month period.
Hong Kong followed with $164 million, and together the two accounted for nearly 73 per cent, or $587 million, of total FDI. Additional inflows were recorded from the United Arab Emirates at $112 million and Switzerland at $107 million.
