Foreign direct investment plummets by 45 percent in Feb

The State Bank of Pakistan (SBP) has revealed that year-on-year (YoY) foreign direct investment (FDI) fell by a staggering 45 percent in February 2025. As per reports, this led to Pakistan attracting just $95 million in FDI.

Independent analysts suggest that Pakistan’s inability to attract FDI is linked to the rising levels of terrorism and political instability. However, while FDI might have fallen in February 2025, a longer snapshot of the situation portrays a more optimistic picture for Pakistan.

This is because, over the first eight months of the fiscal year (FY) 2024-25, FDI has grown by 41 percent to rest comfortably at $1.618 billion. Compared to the corresponding period last year, Pakistan was only able to attract investments that amounted to $1.147 billion.

However, with incidents of terrorist attacks ballooning across the country, many believe that foreign investors may reconsider parking their funds in Pakistani businesses. Data from the South Asian Terrorism Portal (SATP) reveals that in 2024, a staggering 790 incidents of killing were recorded – a level of violence not seen in the country for approximately a decade.

In the first two and a half months of 2025, these incidents jumped to 191, which means that if terrorist operatives continue uninterrupted, Pakistan is on track to see more violence than it has since 2014. This fact does not sit well with potential stakeholders in the economy, causing them to seek out safer destinations for their investments.

According to credible reports, financial experts have outlined how Pakistan’s FDI inflows lag far behind those of neighbouring countries in South Asia. This is primarily linked to the aforementioned issues the government is grappling with: Terrorism and political instability.

These issues have also resulted in Pakistan remaining unable to sell off its loss-making publicly owned enterprises as foreign investors fear they will not be able to recoup their initial investments, let alone generate profits. As such, state-owned enterprises (SOEs), for example, Pakistan International Airlines (PIA), have not been able to find any potential buyers.

However, the federal government is attempting to increase foreign investment levels by taking a hard stance against terrorist operatives that are hurting the country’s international outlook. Islamabad intends to show potential investors that Pakistan is a safe place to invest, with a plethora of lucrative investment opportunities available.

Despite the challenges, China has remained by Pakistan’s side, pouring approximately $662 million of the $1.6 billion that cash-strapped Pakistan has been able to attract in FDIs during the first eight months of FY 2024-25.

The United Kingdom’s contribution for the aforementioned period stands at $167 million, followed closely by Hong Kong and the United States’ contributions at $160 million and $68 million, respectively.