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FDI fatigue: the exit behind the entry

36 0
26.07.2025

FDI (foreign direct investment) inflows are up, but so is the number of investors heading for the exits. This alarming paradox reflects a crisis not just of capital but of confidence. Beneath encouraging headlines lies a deeper, unresolved trust deficit. Pakistan’s economic foundation is showing cracks, and the latest FY25 data from the State Bank of Pakistan reveals troubling undercurrents.

Gross FDI inflows rose 27 percent, from USD 3.17 billion in FY24 to USD 4.03 billion in FY25. Net FDI posted a modest 4.7 percent increase, from USD 2.35 billion to USD 2.46 billion. At first glance, these numbers suggest forward momentum. However, FDI inflows in isolation, without retention or reinvestment, can be dangerously misleading.

Total foreign investment declined 8 percent year-on-year, falling from USD 1.96 billion to USD 1.81 billion. More significantly, foreign private investment dropped 14.8 percent, from USD 2.47 billion to USD 2.10 billion, a clear indicator of declining investor confidence in Pakistan’s long-term potential.

Adding to the concern, multiple global firms have quietly exited the Pakistani market in recent quarters, an unmistakable red flag for those who read beyond the data. Yes, capital is still entering, but commitment is not.

Portfolio investment, often a key indicator of investor sentiment, flipped dramatically, from an inflow of USD 120........

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