The year 2024 marked an improvement in foreign direct investment (FDI) in Pakistan compared to previous years, with the year-end tally for the calendar year (CY24) reaching $2.567 billion. This reflects a 25 percent year-on-year increase and the highest FDI figure since CY17. Data from the State Bank of Pakistan (SBP) also highlights that FDI during the first half of the fiscal year FY25 (1HFY25) grew by 20 percent year-on-year to $1.33 billion.
However, in December 2024, net FDI amounted to $170 million, which represented a 32 percent decline from the $252 million recorded in December 2023. On a month-on-month basis, December inflows were down by over 23 percent compared to November 2024, when FDI stood at $219 million.
The power sector emerged as the leading recipient of FDI in 1HFY25, accounting for 37 percent of total inflows with $488.4 million. The financial business sector followed with $353 million, while the oil and gas exploration sector attracted $166.7 million.
China maintained its position as the largest contributor to FDI in Pakistan, investing $535.5 million during 1HFY25. This accounts for approximately 40 percent of the total FDI and reflects a 48 percent increase compared to $361.5 million during the same period in the previous year. Hong Kong was the second-largest investor, contributing $134.3 million, which marked a 14 percent rise from the $117.4 million recorded in 1HFY24.
Despite these gains, FDI in Pakistan remains far below the country’s potential. Persistent challenges such as political instability, economic downturns, regional and global geopolitical tensions, inadequate infrastructure, and high operational costs continue to hinder foreign investment.
Globally, FDI in 2024 faced significant headwinds due to inflationary pressures, tightening monetary policies, and ongoing geopolitical conflicts. However, the United Nations Conference on Trade and Development (UNCTAD) observed a cautious recovery in greenfield projects and mergers and acquisitions (M&A). This recovery was driven by investments in services, renewable energy, and technology. Key sectoral trends included increased cross-border capital flows into renewable energy and climate-friendly technologies, fueled by global decarbonization goals, as well as the digital economy, which saw substantial investments in cloud computing, artificial intelligence, and e-commerce.
The global trends in FDI offer significant opportunities for Pakistan to tap into emerging sectors and attract greater foreign investment. The rebound in greenfield projects, renewable energy, and technology-driven industries aligns with Pakistan’s potential to position itself as a key player in these areas. With global decarbonization goals driving investments in renewable energy and climate-friendly technologies, Pakistan’s abundant natural resources and need for sustainable infrastructure present a compelling case for foreign investors. Similarly, the digital economy’s rapid growth—fueled by investments in cloud computing, artificial intelligence, and e-commerce—can complement Pakistan’s growing IT sector and its skilled workforce.
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