Business Recorder
Pakistan’s March 2026 FDI number looks better. But the year still looks weak. Net FDI for Mar-26 came in at USD168 million, up 163 percent year-on-year, though down from USD214 million in February. That is an improvement in the monthly flow, but not evidence of a turnaround. The bigger picture remains weak. In 9MFY26, cumulative net FDI stood at USD1.35 billion, down 27 percent year-on-year.Pakistan’s FDI problem is structural, not cyclical. Pakistan has attracted a cumulative USD52 billion in FDI over the past 26 years — barely USD2 billion a year on average, and less than 0.45 percent of GDP. That is far below the roughly 3 percent global benchmark. The gap is hard to ignore. India pulls in more than USD70 billion annually, while even Bangladesh attracts over USD3.5 billion. For a country of Pakistan’s size, this is not a small shortfall. It reflects a long and repeated inability to attract serious foreign capital. The composition of current inflows reinforces the point. China continues to anchor the numbers, contributing more than half of total FDI during the year. Other inflows remain thin. In March, the main contributors were China, Hong Kong, and Japan, with investment concentrated in power and financial services. The pattern is unchanged: CPEC-linked energy and banking keep the numbers alive, while diversified, export-oriented investment remains missing. The external account looks better than it really is. March posted a USD1.1 billion current account surplus, helped mainly by seasonal remittances of USD3.8 billion. But for 9MFY26, the current account is almost flat. Imports are rising, exports are falling, and the trade gap is widening. Remittances are still supporting the position, but they are heavily dependent on the Gulf. With oil prices rising, the import bill is likely to increase in April and May, which could put the current account under pressure again. Reserves also remain vulnerable, as much of the support is coming from friendly-country deposits and rollovers rather than strong export or investment inflows. A country that cannot generate stable export growth or attract sustained investment eventually falls back on debt and remittances to hold the external account together. Pakistan’s current position reflects that dependence more than genuine external strength. That is not a durable equilibrium, and global investors recognise it. The reasons behind Pakistan’s weak FDI performance are not hard to understand. Investors worry that rupee depreciation and inflation will reduce their returns in dollar terms. Tax policies and incentives keep changing, often with every political cycle. The business environment also remains difficult, with too much red tape, unclear rules, weak contract enforcement, unreliable energy, poor logistics, and unresolved land-related issues. Perhaps the clearest signal is who is leaving. When companies such as Shell, Microsoft, Uber, Yamaha, Eli Lilly, Procter & Gamble, and Telenor either exit or reduce their presence, it says more than any official investment campaign. When firms that have already worked in the market decide to step back, it shows that the risks are not temporary — they are deeper and more structural. The near-term outlook does little to change this picture. Ongoing tensions in the Gulf — a key source of both remittances and economic exposure — add another layer of uncertainty. With oil prices elevated and external buffers dependent on rollovers, there is little basis to expect a sustained recovery in FDI flows in the near term. At the current pace, Pakistan is likely to end FY26 with around USD1.9 billion in FDI, below last year and far short of what is needed to lift growth. March was better. But it was a better month in a weak year, not the beginning of a new trend.
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