Pakistan experienced a significant 32.3% surge in net Foreign Direct Investment (FDI) during the first four months of FY25, reaching $904.3 million, according to data released by the State Bank of Pakistan (SBP) on Monday. This marks a notable improvement from the $683.5 million recorded during the same period last fiscal year.
From July to October FY25, FDI inflows totaled $1,242.5 million, offset by $338.2 million in outflows. However, October 2024 witnessed a slight deceleration, with net FDI declining to $133.2 million—a decrease of 18% compared to $163.3 million in October 2023 and a steep month-on-month drop of 65% from $385 million in September 2024.
China Leads Investment Inflows
China maintained its dominant position as Pakistan’s largest foreign investor, contributing 46% of the total FDI during 4MFY25. Chinese investments more than doubled, rising to $414.5 million from $207.1 million in the corresponding period last year.
Hong Kong ranked as the second-largest investor, with net FDI inflows of $99.7 million, a robust 43% increase from $69.9 million in the same period last year, representing 11% of the total share.
Sectoral Distribution of Investments
The power sector attracted the lion’s share of investments, accounting for 46% of total FDI ($414.5 million). This was followed by the financial business sector, which received $189.6 million, and the oil and gas exploration sector, with $103.8 million in inflows. These critical sectors continue to drive FDI growth, reflecting Pakistan’s strategic focus on energy and financial development.
Economic Implications Amid Dollar Shortages
The surge in FDI comes at a time when Pakistan faces acute dollar shortages and struggles to bolster foreign exchange reserves through non-debt inflows. Increased foreign investments are crucial for easing the country’s external account pressures and stabilizing its economy.
This improvement aligns with the country’s current account performance, which posted a surplus of $349 million in October 2024, compared to a deficit of $287 million in the same month last year. The cumulative current account surplus for the first four months of FY25 stands at $218 million, contrasting sharply with a deficit of $1.53 billion during the same period last fiscal year.
The rise in FDI and a narrowing current account deficit signal positive trends for Pakistan’s fragile economy. However, sustaining these improvements will require robust policymaking and continued investor confidence.
