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RNN Reoport
ISLAMABAD — Foreign investors are cashing out big time from Pakistan, pulling away a staggering $1.68 billion in profits and dividends during the first seven months of FY26 (July–January), according to the latest State Bank of Pakistan data. That’s a sharp 26% jump from the $1.33 billion sent abroad last year, with some reports citing $1.626–1.677 billion due to provisional tweaks.
Meanwhile, fresh net foreign direct investment (FDI) has taken a nosedive—plunging 41% to $981.4 million from $1.66 billion the prior year, or even 51% to around $694 million in certain private-investment breakdowns. Gross inflows held near $2.1 billion, but outflows surged to $1.1 billion, wiping out much of the gain. January 2026 showed a modest $173 million net inflow—better than December’s outflow—but still 27% below January 2025.
Record Outflows vs. Shrinking Inflows
Old capital is earning handsomely and heading straight out, especially from protected sectors. Power led with over $400 million—more than doubling year-on-year—thanks to guaranteed dollar yields, take-or-pay contracts, and rupee depreciation boosting foreign returns. Finance followed at $371 million, food at $142 million. These enclaves thrive on barriers to entry, regulatory favoritism, and crony ties, extracting value from local consumers and taxpayers while delivering little reinvestment into jobs or factories.
Foreign investors repatriated $1.68 billion (or $1.626–1.678 billion across reports) in profits and dividends—a 26% YoY increase from $1.33 billion—with power sector outflows alone jumping 106% to $400 million due to guaranteed dollar returns and rupee depreciation. This shows existing foreign capital is highly profitable in protected enclaves (power, finance, food) and is harvesting returns before exiting.
Conversely, net FDI plunged 41% to $981 million (from $1.66 billion), or even 51% to $694 million in some breakdowns, despite gross inflows near $2.1 billion—as outflows surged to $1.1 billion. January 2026 saw only $173 million net inflow (down 27% YoY), reversing December’s outflow but still weak.
The Broader Trap
Pakistan’s real GDP growth lingers at 3–4.75%—barely above population growth—leaving per-capita income stagnant. Macro gains (reserves above $17 billion, inflation in single digits, remittances over $23 billion) ease exits but fail to inspire confidence for transformative investment.
That $1.68 billion outflow drains domestic resources, subsidizing foreign shareholders instead of fueling local growth. This is no roaring recovery—it’s a “harvest and exit” economy.
Without deep reforms—breaking elite capture, enforcing competition, ensuring transparent contracts, and incentivizing reinvestment—value will keep flowing out faster than it flows in. Stabilisation buys time, but bold pivots are needed to turn extraction into development.
