In January 2025, Pakistan experienced a notable uptick in foreign direct investment (FDI), recording a net inflow of $194 million. This figure represents a 15 percent increase from the $170 million reported in December 2024. The total FDI inflows for January amounted to $239 million, with outflows decreasing by 40 percent to $45 million compared to the previous month.
Over the first seven months of the fiscal year 2025 (7MFY25), Pakistan’s net FDI reached $1.52 billion, marking a 56 percent year-on-year growth from the $976 million recorded during the same period in FY24. China continues to be the leading investor, contributing $634 million, followed by Hong Kong with $155 million, the United Kingdom at $148 million, Switzerland at $116 million, and France at $82 million.
Sector-wise, the power industry attracted the highest FDI during 7MFY25, receiving $551 million. The financial services sector followed with $414 million, oil and gas exploration garnered $187 million, and the electronics sector received $105 million.
Although Pakistan has witnessed growth in these vital inflows over the past year, a broader context paints a more complex picture—one that is far from unequivocally optimistic. While recent FDI gains reflect renewed investor interest, they remain well below peak levels seen in the early 2000s. The recent uptick can be partially attributed to some developments aimed at fostering a more investment-friendly climate. However, long-standing structural and political challenges continue to cast a shadow over long-term prospects.
In one recent development, the International Finance Corporation (IFC), the private investment arm of the World Bank, has announced ambitious plans to double its investments in Pakistan. The IFC aims to unlock up to $2 billion annually over the next decade, with a focus on large-scale infrastructure projects, particularly in energy, water, and port development. These investments could send positive signals to investors looking to invest in Pakistan. However, their success will hinge on the country’s ability to implement efficient regulatory frameworks and ensure long-term policy consistency.
Additionally, Saudi Arabia’s growing interest in Pakistan’s mining sector is also trying to lift investor sentiment. Manara Minerals, a Saudi investment fund, is poised to acquire a 10-20 percent stake in Pakistan’s Reko Diq copper and gold mining project, with an estimated investment of $500 million to $1 billion.
Despite these positive developments, significant hurdles remain. While FDI inflows have shown an upward trajectory, they are still a fraction of what they once were. Persistent political instability, policy unpredictability, and macroeconomic volatility continue to deter long-term investment commitments. Foreign investors remain cautious, and wary of abrupt shifts in governance, legal uncertainties, and currency fluctuations that can impact profitability.
In summary, while Pakistan’s FDI figures for January 2025 and the cumulative 7MFY25 period reflect a promising trend, the country’s ability to sustain and accelerate this growth will largely depend on its commitment to political stability, structural economic reforms, and a clear, long-term vision for investment facilitation. Without these critical elements, the recent gains in FDI could prove to be short-lived rather than indicative of a sustained turnaround.
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