Pakistan’s foreign direct investment (FDI) landscape showed mixed signals in the second half of 2025, with a notable net outflow recorded in December, according to data highlighted by leading brokerage firm Arif Habib Limited.In December 2025, the country experienced a net FDI outflow of USD 135 million, reversing the inflow trend seen in previous periods.
This development comes amid ongoing economic stabilization efforts and global investor caution.Despite the monthly dip, certain countries remained key contributors to positive FDI flows.
China, Hong Kong, and the UAE collectively accounted for 86% of the net inflows during the month, underscoring their continued strategic interest in Pakistan’s market despite broader challenges.
For the first half of fiscal year 2026 (July–December 2025), net FDI inflows declined sharply by 43% year-on-year, dropping to USD 808 million from USD 1,425 million in the corresponding period of FY25.
The contraction reflects a combination of factors, including domestic policy uncertainties, global economic headwinds, and delays in major project executions.Analysts view the December outflow as a temporary setback rather than a structural shift, given Pakistan’s improving macroeconomic indicators.
The Pakistan Stock Exchange (PSX) has demonstrated resilience, with the benchmark KSE-100 Index hovering around 187,000 points as of mid-January 2026, supported by strong institutional buying, expectations of monetary easing, and progress in fiscal reforms.
The market’s robust performance in early 2026—marked by multi-thousand-point rallies—signals investor optimism in long-term recovery. Experts emphasize the need to accelerate reforms in ease of doing business, energy sector stability, and privatization initiatives to reverse the FDI downturn.
Sustained inflows from friendly nations like China (via CPEC projects) and Gulf partners could provide a buffer, while addressing structural bottlenecks remains crucial for attracting diversified foreign capital.
The State Bank of Pakistan and economic policymakers are closely monitoring these trends, with hopes that improved external accounts and policy predictability will restore positive momentum in coming quarters.