Pakistan's Foreign Investment Falls 31pc But Power Sector Attracts Most Capital
Pakistan's foreign direct investment fell 31 per cent to $1.409 billion in the first ten months of FY2026, with April recording a particularly weak $54 million net inflow. The power sector was the top destination for foreign capital at $785.6 million, outpacing all other industries despite ongoing tariff and capacity payment pressures.
Pakistan received $1.409 billion (approximately Rs. 394 billion) in foreign direct investment (FDI) during July-April of FY2026 — a 31 per cent decline from $2.035 billion in the same ten-month period of the previous financial year, according to State Bank of Pakistan data. April proved especially weak, with total net FDI inflows of just $54 million against $179 million in April 2025. Despite this broad slump, the electricity and power sector drew more foreign capital than any other industry over the period.
Power Sector Tops the FDI Table
The power sector attracted $785.6 million (≈ Rs. 220 billion) during July-April FY2026, making it the single largest recipient of FDI across all sectors of the economy. This is a notable result for an industry that has faced sustained public criticism over high consumer tariffs, capacity payment obligations to independent power producers (IPPs), and a mounting circular debt burden.
The financial services sector — primarily commercial banks — ranked second with $659 million (≈ Rs. 184.5 billion). State Bank data indicates that banks have generated large profits by investing in government securities at elevated interest rates — a pattern that channels capital toward sovereign debt rather than productive infrastructure investment.
China Still Dominant, Though Inflows Have Moderated
China provided $740 million of the $1.409 billion total, accounting for more than half of all FDI received during the ten-month period. However, Chinese inflows were higher in the same period last year at $1.04 billion, suggesting some moderation in CPEC (China-Pakistan Economic Corridor)-linked spending even as Beijing remains Pakistan's largest bilateral investor and biggest trading partner. Hong Kong added a further $281 million, Switzerland $170 million, and the UAE $169 million.
The April 2026 monthly data illustrates the volatility embedded in these figures. Chinese FDI for the month alone stood at $61 million — exceeding Pakistan's net FDI of $54 million for the same month — because concurrent withdrawals by other countries erased a portion of fresh inflows and pulled the overall net figure below China's own contribution.
Norway Leads Withdrawals; Telecoms Post Steep Disinvestment
The largest single outflow came from Norway, which withdrew $365 million during July-April FY2026, compared with just $5 million invested in the equivalent period of FY2025 — a reversal that moved Norway from a negligible investor to the biggest single capital exporter in one year. The telecommunications sector recorded net disinvestment of $477 million over the ten months, up sharply from $115 million in the prior year, indicating a significant reversal of foreign confidence in that sector's outlook.
Frequently Asked
Questions about this story
How much FDI did Pakistan's power sector attract during July-April FY2026?
Pakistan's power sector received $785.6 million (approximately Rs. 220 billion) in FDI during July-April FY2026, making it the top-ranked sector ahead of financial services. Much of this investment is tied to CPEC energy generation projects.Why did Pakistan's total FDI fall by 31 per cent in FY2026?
Total FDI declined to $1.409 billion from $2.035 billion due to reduced inflows from key investors including China, whose contribution fell from $1.04 billion to $740 million, combined with large simultaneous withdrawals — most notably Norway's $365 million outflow — which compressed the headline net figure significantly.Does new power sector FDI mean lower electricity bills for Pakistani households?
Not directly. Fresh investment can expand generation capacity and ease load shedding over time, but existing capacity payments to IPPs are already embedded in NEPRA-approved tariffs. Those fixed costs will only fall if the Power Division and NEPRA structurally reform payment obligations — new investment alone does not achieve that.Which countries invested the most in Pakistan during July-April FY2026?
China led with $740 million — more than half of all inflows — followed by Hong Kong at $281 million, Switzerland at $170 million, and the UAE at $169 million. Norway recorded the largest single withdrawal at $365 million during the same period.How does falling overall FDI indirectly affect electricity tariffs in Pakistan?
A weaker investment climate puts downward pressure on the rupee, which raises the cost of dollar-priced fuel imports and increases government borrowing costs. Both factors can push up the fuel and capacity charge components of electricity tariffs that NEPRA adjusts through its Quarterly Tariff Adjustments, ultimately raising bills for consumers across all DISCOs.
Tags