Pakistan’s net Foreign Direct Investment (FDI) fell 20.1% year-on-year to $178.6 million in July FY27, highlighting continued challenges in attracting long-term foreign capital despite the government’s efforts to promote investment.
According to State Bank of Pakistan data, net FDI stood at $223.5 million in July FY26. The latest decline reflects weaker gross inflows alongside higher capital outflows.
Gross FDI Inflows Decline
Gross FDI inflows dropped 8.8% to $304 million in July FY27, compared with $333.5 million during the same month last year.
At the same time, capital outflows increased 13.9% to $125.4 million, up from $110.1 million in July FY26.
The combination of lower inflows and higher outflows resulted in the significant decline in net FDI.
Portfolio Investment Provides Some Support
While direct investment weakened, Pakistan saw improvement in portfolio investment.
Foreign private investment increased 3.8% to $197 million, supported largely by a strong recovery in portfolio equity securities.
Portfolio equity investment recorded a net inflow of $18.4 million, compared with a net outflow of $33.8 million in July FY26. This represents a 154.4% year-on-year improvement.
The recovery suggests that foreign investors showed greater interest in Pakistan’s financial markets, even as long-term direct investment remained under pressure.
Foreign Public Investment Turns Positive
Foreign public investment also recorded a positive trend.
The sector registered a net inflow of $7.5 million in July FY27, compared with a net outflow of $10.8 million during the same period last year.
This represents a 169.4% year-on-year improvement.
Supported by stronger portfolio and public investment flows, total foreign investment in Pakistan increased 14.3% to $204.5 million, compared with $178.9 million in July FY26.
FY26 FDI Remains Under Pressure
The broader trend remains challenging. Pakistan’s net FDI during FY26 stood at $1.672 billion, down 32.5% from $2.477 billion in FY25.
The latest annual figure was also below the $2.347 billion recorded in FY24, indicating that Pakistan has yet to regain the stronger levels of direct investment seen previously.
Long-Term Investment Remains the Key Challenge
The July figures present a mixed picture for Pakistan’s external investment position.
While portfolio investment and foreign public investment improved, the 20.1% decline in FDI points to continued difficulties in attracting stable, long-term capital.
For policymakers, the challenge is not simply increasing headline investment numbers but creating conditions that encourage foreign companies to establish and expand long-term operations in Pakistan.
Improved policy consistency, regulatory certainty, infrastructure, energy availability and investor confidence will remain important factors in determining whether FDI can recover in the coming months.