Pakistan’s FDI puzzle |
Pakistan’s economy appears to be moving towards a more stable footing. Inflation has notably eased since the peak of 38 percent in 2023, the exchange rate has steadied, and the government’s engagement with international financial institutions has reassured many observers that the worst of the macroeconomic turbulence may be behind us.
According to OICCI’s Perception and Investment Survey 2025, over 70 percent of foreign investors are willing to recommend Pakistan for future FDI, a sign of renewed confidence in the country’s economic potential with the country’s risk profile also improving where high-risk perception has fallen from 54 percent to 44 percent, and medium-risk perception has risen to 51 percent.
Yet, despite this apparent improvement, investment, both domestic and foreign, continues to lag particularly when Pakistan should be attracting at least 3 percent of GDP in FDI annually to support sustainable growth, industrial expansion, and long-term economic resilience.
The question that needs an answer is: why are investors still hesitant?
The reality is that economic stability alone is not enough to convince investors. For both local and foreign businesses, perception matters as much as policy. As per OICCI’s latest Perception and Investment Survey, 82 percent of investors believe that negative perceptions about Pakistan significantly influence investment decisions. Unfortunately, the country’s image as an investment destination continues to suffer from recurring episodes of uncertainty. Each time a negative headline surfaces such as the IMF seeking clarity over an $11 billion trade data gap, the controversy surrounding K-Electric’s revised tariff decision, or geopolitical uncertainty, it unnecessarily affects investor confidence and undermines the credibility painstakingly built through economic........