Pakistan's Power Sector Tops FDI Destinations Despite 31% Overall Decline in FY26
Pakistan's power sector pulled in USD 785.6m in foreign direct investment during the first 10 months of FY26 — the largest sectoral inflow, even as overall FDI fell 31% year-on-year.
Pakistan's power sector attracted USD 785.6 million in foreign direct investment (FDI) during the first 10 months of FY26 — the largest inflow into any single sector — even as overall FDI to the country fell 31% year-on-year, according to State Bank data released this week.
The headline numbers
Total FDI inflows for July 2025–April 2026 stood at USD 1.409 billion, down from USD 2.035 billion in the same period of FY25. April alone delivered just USD 54 million versus USD 179 million in April last year — the weakest single month in two years.
Within that shrinking pie, the power sector's USD 785.6m represented more than half of total inflows, ahead of the financial-business sector (mostly banks) at USD 659 million.
Where the money came from
- China — USD 740m total, the dominant single source, though down sharply from USD 1.04 billion in the same period last year.
- Hong Kong — USD 281m, much of it routed via CPEC-linked power vehicles.
- Switzerland — USD 170m.
- UAE — USD 169m, with a growing tilt toward renewable energy and grid-storage projects.
The largest outflow was Norway at USD 365m withdrawn during the period — sufficient on its own to drag the headline FDI number into negative territory in two months.
Why power is the magnet
Three structural factors keep power-sector FDI flowing even as broader sentiment cools: NEPRA's USD-indexed tariff structure for IPPs protects returns against Pakistani rupee depreciation; the Power Division's IGCEP (Indicative Generation Capacity Expansion Plan) gives investors a 10-year visibility window; and CPEC's energy framework still anchors several Chinese commitments through 2030.
The risks investors are now pricing in include: a possible re-opening of legacy IPP contracts (the Task Force on IPPs is still active), circular debt approaching Rs. 2.5 trillion, and the looming Disco privatisation that will redraw the off-taker risk profile for new generation.
Frequently Asked
Questions about this story
How much FDI did Pakistan's power sector attract in FY26?
USD 785.6 million during July 2025 to April 2026 — the largest single-sector inflow, ahead of financial services at USD 659 million.Why did overall FDI drop so sharply?
Total FDI fell 31% YoY to USD 1.409 billion, dragged down by a USD 365m withdrawal from Norway and reduced inflows from China (USD 740m vs USD 1.04bn last year).Is Chinese FDI in Pakistan declining?
Yes, but China remains the single largest investor with USD 740m. The drop reflects completion of major CPEC Phase 1 power projects rather than disinvestment.How does power sector FDI affect electricity bills?
New capacity built under USD-indexed Power Purchase Agreements (PPAs) recovers its dollar costs from Pakistani consumers through fuel cost adjustments and capacity payments on monthly bills.Will Disco privatisation affect future FDI?
Yes. The sale of FESCO, GEPCO, and IESCO is expected to attract a separate wave of distribution-focused FDI starting Q1 FY2027, distinct from the generation-sector inflows seen so far.
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