Pakistan has experienced significant foreign investment outflows, with nearly USD 1 billion withdrawn from treasury bills by just three countries during the current financial year. According to the State Bank of Pakistan, from July 1 to March 14 of this fiscal year, the inflows into T-bills totaled USD 1.163 billion, while outflows amounted to USD 1.121 billion, leaving a minimal net balance of USD 42 million.

The withdrawal of USD 1 billion has nearly equaled the total inflows, reflecting investor caution in Pakistan’s fragile economy, despite the relatively high returns on T-bills. The United Kingdom, historically the largest investor in Pakistan’s T-bills, invested USD 710 million in FY25 but withdrew USD 625 million. Meanwhile, the United Arab Emirates and the United States pulled out USD 205 million and USD 130 million, respectively.

In an effort to attract foreign investment, the Pakistani government has raised yields on T-bills compared to most developed and developing economies. However, analysts attribute foreign investors' caution to Pakistan's unstable external sector, exacerbated by an annual external debt servicing burden of approximately USD 25 billion.

The government has frequently sought financial support from the International Monetary Fund (IMF) and is working to reschedule debt with China, the UAE, and Saudi Arabia. One senior banker expressed concern over Pakistan's inability to access international markets for commercial loans or issue bonds. Analysts also cited political and economic instability, coupled with low growth indicators, as major factors contributing to declining investor confidence in Pakistan's economy.

Disclaimer: This image is taken from Reuters.