KARACHI: Foreign direct investment (FDI) fell 22 per cent in the first two months of the current fiscal year, undermining government efforts to attract inflows through special initiatives.

According to State Bank data released on Thursday, FDI during July-Aug FY26 stood at $364m against $467m in the same period last year, a decline of $103m. In Aug alone, inflows dropped to $156m from $272m a year earlier, down 42.6pc.

Despite repeated policy drives, including the formation of the Special Investment Facilitation Council (SIFC), the government has struggled to draw significant foreign investment. Successive administrations have faced similar challenges.

“The cost of doing business is too high, while the taxation system is complicated and constantly changing,” said Aamir Aziz, a textile exporter. He added that persistent uncertainty in utility supplies and tax policy deters foreign investors.

Mr Aziz argued that unless conditions improve, both foreign and local investors will remain cautious. “Many industrialists prefer to invest in countries like Malaysia rather than expand in Pakistan,” he said.

SBP reserves

Meanwhile, the State Bank’s foreign exchange reserves rose by $21m in the week ending Sept 12, reaching $14.357bn. Total liquid reserves held by the country stood at $19.735bn, with commercial banks holding $5.378bn.

Published in Dawn, September 19th, 2025