KARACHI: Amid the ongoing US-Iran conflict, investors from Gulf countries are increasingly seeing Pakistan as a safe place to invest in domestic bonds, which offer higher yields and risk-free returns.
Data released by the State Bank of Pakistan on Monday showed that Gulf countries, particularly the UAE, invested $129.8 million in long-term Pakistan Investment Bonds (PIBs) in the first 25 days of September.
Foreign investors have remained reluctant to invest in the country due to factors such as political uncertainty, lack of domestic investment and poor growth. Pakistan could attract foreign investment from Gulf countries facing serious security problems. These countries have been facing disruptions in their oil trade as Iran claimed to have closed the Strait of Hormuz, while their earnings have declined since the war started on Feb 28.
Some financial experts said the Gulf countries have invested billions of dollars in the United States, particularly in tech companies, but the changing situation in US-Iran relations and unpredictable US ties with other Gulf countries have created uncertainty about where to keep their money safe. However, investment in domestic bonds is considered “peanuts” compared to their investment capacity.
Higher yields, risk-free returns cited as key attraction
In September, the UAE invested $110m in PIBs, and $5m in treasury bills. Similarly, Bahrain invested $10m in PIBs and $14m in T-bills during the same month.
During the first quarter, from July 1 to Sept 25, total investment in PIBs stood at $203.7m, with an outflow of $115m, while investment in T-bills stood at $161m, with an outflow of $171m.
“Most of the maturing amount is being reinvested in domestic bonds, with a small additional amount. However, the sign is good that domestic bonds are attractive and the Gulf countries could see this opportunity as a good option,” S.S. Iqbal, a money market expert, said, adding that the government should try to make them more attractive for Gulf investors.
Moreover, he said, Pakistan needs to build its foreign exchange reserves faster to assure potential investors that their investment is safe.
The government is also making efforts to promote long-term PIBs to avoid frequent repayments. If foreign investors, including overseas Pakistanis, buy PIBs, it could help the government sell more.
Overseas Pakistanis can buy PIBs, as reflected in remittances that may reach $44 billion in FY27. They keep their savings in European and American banks as their trust was largely destroyed when their foreign exchange reserves in Pakistani banks were frozen by the then government in 1998, following nuclear tests and the imposition of international sanctions.
Published in Dawn, October 6th, 2026
