December 2025 Update and Outlook uploaded by the Finance Division at the end of each month revealed foreign direct investment (FDI) of 927.4 million dollars (July-November 2025) against 1242.4 billion dollars in the comparable period the year before – a 34 percent plunge – while portfolio investment registered negative 613.8 million dollars July-December 2025-26 against positive 148.7 million dollars in the comparable period the year before.
The State Bank of Pakistan (SBP) this week past calculated a further plunge – by 43 percent – in FDI in the first six months (July-December) of 2025.
The question is why given that post-April 2022 the two Shehbaz Sharif-led administrations (including the interim government that assiduously adhering to the conditions agreed with the International Monetary Fund under the nine month 3 billion dollar Stand By Arrangement) signed over 25 billion dollar worth of Memoranda of Understanding (MoUs) with friendly countries that have yet to be transformed into binding contracts?
Pakistani administrations – be they civilian or military – have rhetorically and proactively sought FDI as the preferred economic growth model. There have been discussions on import substitution measures, on export promotion incentives extended at the taxpayer’s expense and on ending the elite capture evident in our annual budgeted allocations and sources of revenue heavily reliant on indirect taxes whose incidence on the poor is greater than on the rich. In spite of these policies announced amidst much fanfare by civilian and military administrations the country’s productive base has remained severely limited to consumer items with value addition in most sectors, including textiles, highly dependent on import of raw materials or semi-finished products – a dependency that fuels the boom bust cycle.
However, administration after administration has touted Pakistan’s rich mineral resource base and sought FDI for extraction and development. The Geological Survey of Pakistan identifies four major mineral resources: (i) Thar lignite coal resources, discovered in 1991, propelled Pakistan to seventh place on the list of top 20 countries. While today Thar coal generates around 2640 MW under the umbrella of China Pakistan Economic Corridor (CPEC) with the reported potential to generate 100,000 MW yet paucity of domestic capital necessitates reliance on FDI. Multilateral interest, with the lowest borrowing rates and without the need to repatriate profits, has not been forthcoming given that lignite is considered less efficient and dirtier (with higher carbon dioxide per KWh) than higher coal grades – elements that no doubt exacerbate Pakistan’s already severely environmentally stressed status. It is, therefore, unclear how long Pakistan can justify reliance on Thar coal; (i) Saindak copper mines have long been in operation and between 2002-2022 China’s Metallurgical Construction Company (MCC) paid 520 million dollars in taxes, fees and profit shares, in addition to 1.2 billion dollars for local procurement. In 2023-24, MCC paid 11.2 million dollars in royalties to Balochistan along with 1.7 million-dollar presumptive tax and 867,474 rupees in Export Processing Zone (EPZ) service charges; (iii) Reko Diq Copper-Gold Deposits discovered in 1978-79 has yet to begin operations though all pending litigation has been resolved. Asian Development Bank, one of several agencies, is lending 300 million-dollars to Reko Diq Mining Company Private Limited – with 50 percent shares held by Barrick Mining Corporation, which will build and operate the mine, 25 percent owned by the Government of Balochistan (which will be extended 110 million-dollar partial credit guarantee, the largest ever FDI into the province) and 25 percent by three federal state-owned enterprises; and (iv) Duddar lead and zinc deposits first discovered in 1980 operated by MCC since 2014 (though construction was carried out by China’s Huaye Group). The total royalties paid by the Chinese is 1.052 billion rupees to Balochistan government, 210.487 million rupees to the federal government as presumptive tax, 105.2 million rupees as development surcharge to the Export Processing Zone Authority.
READ MORE: EDITORIAL: Plunge in FDI
Inordinate delays in developing these mineral resources are largely attributable to bureaucratic red-tapism, major difference of opinion between the Centre and the province where the mineral resource is located and frequent litigation. At the same time while foreign companies engaged in extraction and development do improve roads, establish schools and hospitals, hire locals at higher wages than those available in the area, yet surveys show little if any perception of a rise in quality of life. While taxes that are pocketed by the federal and the provincial governments are, at best, neither used for social and physical infrastructure development of the province or simply squandered on current expenditures assuring the continuation of elite capture of resources and, at worst, are deliberately misappropriated.
There have been frequent claims of unearthing of massive natural mineral wealth (oil, gold, silver, and copper) –
in Chiniot and Kekra to name two locations recently cited - which have yet to pan out. In November last year Prime Minister Shahbaz Sharif claimed gemstone export potential of 450 billion-dollars, of a significant gold discovery in Tarbela Dam soil estimated at 636 billion dollars, and substantial gold/copper finds in Balochistan though by now the consensus is that they refer to potential rather than extractable minerals.
However, Pakistan’s nuclear programme has indubitably emerged as an asset that was originally developed as a deterrent to Indian hegemony but in the new international world order may well have been a critical factor strengthening Pakistan’s geopolitical relevance. And, ironically, it is two civilian elected prime ministers who can be credited with this programme – in 1972, a year after the loss of East Pakistan, Z A Bhutto launched the programme pledging, “we will eat grass, even go hungry, but we will have our own nuclear bomb.” And on 28 May 1998, Nawaz Sharif as prime minister gave his approval to initiate the nuclear tests in the Chagi district of Balochistan, in response to the Indian tests in Pokhran on 11 and 13 May the same year.
Opinion is divided as to whether Pakistan’s May 2025 victory over India changed our geopolitical relevance rather than our nuclear programme; however, the sequence of events gives added weight to the latter opinion: Israel attacked Doha on 9 September 2025 in spite of Qatar’s strong ties with the US and in spite of the fact that the US has the largest regional base in Qatar. Eight days later, on 17 September, Saudi Arabia and Pakistan signed the Strategic Mutual Defence Agreement (SMDA) with the clause that “any aggression against either country shall be considered an aggression against both.” And Türkiye, a NATO country, has confirmed talks are ongoing to bring Türkiye into the SMDA.
Given that both Saudi Arabia and Türkiye have access to a plethora of conventional weapons as well as defence pacts with the US, the SMDA may well be indicative of a change in the regional perception notably that it is Israel and not Iran that is the major destabilising force. Israel has paid no price for openly flouting international rules, it violates ceasefire deals and is committing genocide for the third year running, because of unwavering US backing, and its current far right wing leaders may well launch a nuclear attack if piqued.
The terms of the SMDA have not been made public but it is relevant to note that Gulf states contributed 36 billion dollars to the US for the Gulf War, Qatar has invested billions of dollars into expanding the US Al Udeid air base, and has funded facilities for US airmen and command centres, and Saudi Arabia too has paid hundreds of millions of dollars to cover US troop operating costs.
To conclude, given the source of instability in the region is Israel, Pakistan, as the only Muslim nuclear power, must expand the SMDA to include other regional Muslim countries and by further strengthening our geopolitical relevance make Pakistan a safe place to invest in.
Copyright Business Recorder, 2026
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