Open for exits

EDITORIAL: An economy that loses more foreign exchange through profit repatriation than it gains through foreign direct investment has an investment problem, a confidence problem and, ultimately, a credibility problem.

The latest figures showing profit and dividend outflows exceeding foreign direct investment by 32 percent during the first eleven months of FY26 expose a weakness that policymakers have spent years trying to downplay.

At a time when Pakistan’s external position remains heavily dependent on fragile foreign exchange inflows, the country is effectively exporting capital faster than it is attracting it.

The figures are especially troubling because they point to a trend moving in exactly the wrong direction. Pakistan’s foreign exchange reserves have only recently emerged from crisis territory, while uncertainty in global energy markets continues to threaten the external account. Under such circumstances, policymakers should be seeking every possible avenue to attract stable long-term investment. Instead, the latest data show foreign investors repatriating $2.154 billion in profits and dividends, substantially exceeding fresh foreign direct investment.

Part of this outcome reflects a reality that should not be ignored. Investors expect the freedom to move their profits. The decision to normalise repatriation after the IMF programme was both necessary and correct. No country can credibly market itself as an investment destination while preventing investors from accessing their earnings.

Yet investors also possess long memories. The restrictions imposed during Pakistan’s foreign exchange difficulties a few years ago left a lasting impression on international businesses. Boardrooms making investment decisions today have not forgotten those episodes, nor should they be expected to. Trust, once damaged, takes years to rebuild and only moments to destroy.

The challenge therefore extends beyond repatriation itself. Pakistan is not merely competing for capital against neighbouring economies. It is competing against memories of policy reversals, administrative restrictions and economic instability. That burden cannot be overcome through investment conferences and promotional campaigns alone.

More importantly, foreign investors rarely rush into markets where domestic investors remain hesitant. This point receives far less attention than it deserves. The strongest advertisement for any economy is often the behaviour of its own entrepreneurs. Local investors understand regulatory risks, political realities and market conditions better than any foreign institution ever can. When they are investing aggressively, foreign capital tends to follow. When they remain cautious, foreign investors usually become even more cautious.

That is why the absence of robust domestic investment remains one of Pakistan’s most serious economic weaknesses. Businesses continue to grapple with policy uncertainty, inconsistent taxation, regulatory unpredictability and concerns about long-term economic direction. These conditions discourage local investment first and foreign investment shortly thereafter.

Against this backdrop, the recent privatisation of PIA deserves recognition as a genuinely positive signal. The importance of the transaction extends beyond the airline itself. Successful privatisation demonstrates a willingness to create opportunities for private capital, reduce the state’s footprint in commercial activity and move economic policy from rhetoric towards execution. Investors notice such developments because they provide evidence of intent rather than promises of future action.

Still, isolated successes will not be enough. Pakistan requires a broader revival of investment confidence if it hopes to generate sustainable growth, strengthen exports and reduce dependence on external borrowing. Foreign investors may welcome the restoration of repatriation freedoms, but they will ultimately judge the country by the opportunities available for future investment rather than the ease with which past profits can be withdrawn.

That is the uncomfortable message contained within the latest figures. Pakistan has succeeded in making it easier for investors to take money out. The far more important task is persuading them to bring more money in. Until that balance shifts decisively in the other direction, concerns about the country’s investment climate will remain difficult to dismiss.

Copyright Business Recorder, 2026