ISLAMABAD: Foreign Direct Investment (FDI) into Pakistan declined sharply by 43% during July–December of fiscal year 2026 (FY26), according to the Finance Division’s Monthly Economic Update and Outlook for January 2026 released today.
Portfolio investment also remained negative at USD 225.1 million, slightly lower than last year’s outflow of USD 221.8 million. In contrast, Pakistan’s stock market index surged 64.2 percent, market capitalization increased by 49.9 percent, and company incorporation rose 28.7 percent during the same period.
Exports decline, current account posts a deficit
The report highlighted that exports fell by 5 percent in the first half of FY26, while the current account deficit widened to USD 1.174 billion compared to a surplus of USD 0.96 billion last year. Inflation is projected to remain between 5 and 6 percent, while FDI totalled USD 808.1 million, down from USD 1.424 billion in the corresponding period of FY25.
Major net inflows came from China (USD 422.9 million) and Hong Kong (USD 163.8 million), with power and financial services attracting the most investment. Conversely, the communications sector recorded an outflow of USD 411.4 million.
Economic indicators show mixed performance
Remittances rose 10.6 percent to USD 19.7 billion, led by Saudi Arabia and the UAE, while large-scale manufacturing grew 6 percent, driven by textiles, automobiles, food, and beverages. Cement dispatches increased 9.7 percent, and agriculture posted 2.9 percent growth, with livestock contributing 6.3 percent. Credit disbursement to agriculture rose 11.4 percent, while private sector credit registered Rs. 578.4 billion.
Government fiscal management strengthens
The government achieved a fiscal surplus of 0.8 percent of GDP in July–November FY26 due to higher revenues and lower mark-up payments. FBR tax revenues grew 9.5 percent to Rs. 6,161 billion.
Meanwhile, the trade deficit widened to USD 17.6 billion from USD 13.1 billion, as imports rose faster than exports. Money supply (M2) grew 3.7 percent, supported by higher net domestic assets despite a slower increase in net foreign assets.
Overall, Pakistan’s economy showed resilience in markets and manufacturing, but declining FDI and trade deficits underscore ongoing macroeconomic challenges.
