- Despite a sharp March dip, cumulative FDI still rose by 14 per cent this year
Policymakers in both developing and advanced economies agree that foreign direct investment (FDI) is a key element of a successful development strategy. There is no doubt that FDI plays an increasingly significant role in the development of capital-deficient developing countries. This is because it is not only a stable source of foreign inflows, but it also assists in technological transfer and employment generation. FDI offers a viable way for developing countries to increase their savings and achieve economic growth.
| FDI In Pakistan ($ Million) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Country | 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | 2023-24 | 2024-25 (Jul-Jan) |
| China | 763.2 | 1,311.90 | 130.8 | 846.6 | 751.6 | 531.6 | 432.2 | 568.2 | 633.6 |
| UK | 215.4 | 304.6 | 185 | 119.1 | 141 | 31.8 | 65 | 268.2 | 148.2 |
| USA | 45.7 | 161.7 | 88.1 | 99.2 | 166.4 | 249.6 | 89.3 | 137.3 | 59 |
| Hong Kong | 123 | 183.6 | 171 | 190.7 | 157.2 | 137.7 | 101 | 358.5 | 154.7 |
| Switzerland | 101.7 | 78.5 | 21.2 | 62.8 | 61.7 | 146.2 | 134 | 28.7 | 115.7 |
| U.A.E. | 120.1 | -4.4 | 103.7 | -44 | 115.7 | 143.9 | 180.1 | 87.3 | 68.2 |
| Italy | 61.5 | 56.6 | 51.9 | 57.4 | 34.8 | 8.6 | 1.9 | 1.2 | |
| Netherlands | 457.6 | 100.3 | 69 | 133.2 | 96.9 | 104.1 | 71.9 | 71 | 47.2 |
| Austria | 21.7 | 27.4 | 7.6 | 3.8 | 1 | 0 | -0.3 | -1.7 | -0.4 |
| Japan | 57.7 | 59.8 | 117.3 | 52.5 | -13 | -12.3 | 183 | 10.9 | -3.4 |
| Turkey | 135.6 | 29.8 | 73.8 | 26.1 | 13.4 | -0.3 | 17.6 | 11.1 | 6.3 |
| Others | 303.4 | 470.5 | 343 | 1,076.20 | 305.7 | 500.7 | 173.4 | 360.2 | 91.1 |
| Total | 2,406.60 | 2,780.30 | 1,362.40 | 2,597.50 | 1,820.50 | 1,867.80 | 1,455.80 | 1,901.60 | 1,523.60 |
However, flows of FDI have varied across developing countries. While some nations have succeeded in attracting considerable investment, capital inflows continue to elude most low-income economies.
In March 2025, the State Bank of Pakistan (SBP) registered a sharp fall in FDI, with net inflows dropping to just $25.75 million — down a staggering 91 per cent from $294.17 million in the corresponding month last year. The decline was also steep on a month-on-month basis, with FDI falling from $385 million in February 2025.
Despite the dismal performance in March, cumulative FDI for the first nine months of FY2025 reached $1.64 billion, marking a 14 per cent year-on-year rise from $1.44 billion during the same period in the previous fiscal year. However, March’s figures cast a shadow over what had otherwise been a relatively stable inflow trend in FY2025.
The breakdown of March’s direct investment reveals that while inflows amounted to $176.55 million, this figure showed a 49 per cent year-on-year decline. Meanwhile, outflows surged to $150.8 million — a massive 200 per cent increase from March 2024 — significantly eroding net FDI.
Foreign private investment also declined sharply. In March 2025, net private investment was recorded at just $10.43 million — a dramatic drop from $312.8 million a year earlier. Portfolio investments also showed worrying trends. Equity securities saw an outflow of $15.32 million, reversing the $18.63 million inflow recorded in March 2024. Additionally, public portfolio investments registered a substantial outflow of $116.08 million during the month.
As a consequence, the overall foreign investment in March 2025 recorded a net divestment of $105.65 million — a stark contrast to the net investment of $347.33 million recorded in the same month last year. On a cumulative basis, total foreign investment during the first nine months of FY2025 amounted to $1.3 billion, down from $1.61 billion in 9MFY2024.
These statistics reflect heightened investor caution amid ongoing macroeconomic and political instability in Pakistan, coupled with a broader global risk aversion toward emerging markets.
It is said that Punjab’s conducive environment is attracting foreign investment. A Chinese mobile company has begun organising a mobile phone manufacturing plant in Faisalabad’s Industrial Estate, expected to begin production within two years. Additionally, foreign companies producing solar panels and lithium batteries also plan to establish factories in Punjab.
Sources indicate that Pakistan’s digital ecosystem — powered by its youthful population and strategic geographic location — presents a promising destination for foreign digital investors. The government of Pakistan aims to attract international investment, promote digital innovation, and boost the country’s ambition to achieve $60 billion in digital economic output by 2030.
China held the majority share (41.63 per cent) of direct investments in Pakistan during 9MFY2025, with investments rising substantially by 107.23 per cent year-on-year, compared with $330.32 million in 9MFY2024. The United Kingdom contributed $186.27 million (11.33 per cent), up 4.08 per cent year-on-year, while Hong Kong’s share stood at 10.7 per cent with $175.89 million, reflecting a 14.34 per cent increase year-on-year.
Other key investors included Switzerland ($146.89 million), Others ($114.98 million), and the UAE ($88.46 million) during 9MFY2025.
The Foreign Portfolio Investment (FPI), which tracks equity market investments, recorded a negative $131.4 million in March. On a cumulative basis, FPI showed a divestment of $342.35 million in 9MFY2025, compared to an investment of $164.95 million during the same period last year.
Interestingly, the United States emerged as the biggest portfolio investor during the month, investing $4.12 million in March and $112 million over 9MFY2025.
It is important to note that global FDI strategies are shifting positively. Screening and restrictions introduced on national security grounds have stabilised in most major investment-host countries. Simultaneously, many developing countries are accelerating the introduction of new policy initiatives to facilitate and promote investment.