• No new investment by Feb 6; $22.5m net outflow recorded
• 68pc of T-bill inflows returned during July-January

KARACHI: Foreign investment in domestic debt instruments dried up in early February after strong inflows in January, as State Bank of Pakistan (SBP) data showed no new inflows into treasury bills (T-bills) were recorded as of Feb 6 and instead a net outflow was observed.

T-bills, currently offering returns of up to 10 per cent, are typically the most attractive domestic debt instrument for foreign investors, despite heightened regional risks. Analysts, however, attributed the February lull to global uncertainty and shifting risk appetite.

SBP figures showed that while T-bills attracted $176 million in January, they failed to draw a single dollar during the first six days of February. During the same period, an outflow of $22.5m was recorded.

For July-January FY26, total inflows into T-bills stood at $732m, against outflows of $499m, which shows that about 68 per cent of the investment exited during the period.

In Pakistan Investment Bonds (PIBs), inflows during July-January were $53m, while outflows were $15m. The data also showed no foreign inflows into PIBs so far this month.

Analysts offered several reasons behind January’s higher inflows, including a relatively stable exchange rate, elevated global financial risks and the appeal of high-yield government paper.

“Foreign investment is no longer looking for risk-free opportunities, as even gold, silver and oil are not risk-free due to the hostile situation in the Middle East, the war in Ukraine and global economic change coming from China,” said S.S. Iqbal, a currency market expert.

Economists said the overall picture remained discouraging, noting that bond inflows were concentrated in a handful of countries. SBP data showed the largest inflows in T-bills during July-January came from the UAE ($225m), Bahrain ($174m), the UK ($171m) and the US ($61m). The two Gulf states accounted for about $400m combined.

Some analysts believe overseas Pakistanis may account for a sizeable portion of the inflows, seeking short-term gains from high-yield T-bills.

The weakening trend in portfolio flows comes as foreign direct investment (FDI) has also slowed. Data showed that FDI fell 43 per cent in the first seven months of FY26 to $808m from $1.425bn in the same period of the previous fiscal year.

The government has sought to attract foreign investment through various incentives, but has struggled to draw external interest in major privatisation efforts, including the sale of Pakistan International Airlines.

Published in Dawn, February 14th, 2026