Pakistan is witnessing a major decline in foreign direct investment (FDI) during the current fiscal year, underscoring ongoing challenges in attracting sustained inflows amid economic uncertainty and shifting global conditions.
Foreign direct investment (FDI) into Pakistan dropped sharply by 33% to $1.195 billion during the first eight months of FY26, reflecting weakening investor confidence and continued dependence on a limited number of sources, particularly China.
Data released by the State Bank of Pakistan shows that the figures largely represent the period before the outbreak of the Gulf conflict, meaning the full impact of the war has yet to be reflected.
In February alone, FDI stood at $213 million, with China contributing $140 million, or 66% of the total. Overall, inflows during July–February FY26 fell significantly from $1.793 billion in the same period last year, marking a decrease of $598 million.
China remained the dominant investor, accounting for $635 million, or 53% of total FDI, underscoring Pakistan’s heavy reliance on Chinese capital. Other contributors included Switzerland ($141.4 million), the UAE ($139 million), and the UK ($74 million).
Analysts warn that inflows from Middle Eastern countries may remain subdued, as ongoing regional instability could weigh on their investment capacity for the foreseeable future.
