ISLAMABAD – Foreign investors started pulling back their money as large sums vanished in last nine months. What once promised steady returns now seemed too risky amid the shadow of the Gulf War, and a sense of panic began to ripple through the markets.
The South Asian nation is facing another trouble as nearly 90% of funds recently parked in its domestic bonds now pulled out, according to the latest State Bank of Pakistan (SBP) data. Despite treasury bills offering attractive yields of around 11.5%, the ongoing Gulf War has spooked investors and halted foreign participation.
The total foreign inflows into government securities reached $886.7 million. But withdrawals skyrocketed to roughly $794 million, leaving a meager $93 million still invested, just 10% of the original inflow.
While bond outflows alone may not trigger an immediate market collapse, the bigger threat looms in the potential non-renewal or withdrawal of financial deposits from friendly nations. United Arab Emirates UAE is reportedly reluctant to roll over a $2 billion deposit maturing this month, raising fears of further capital flight. Deposits from China and Saudi Arabia, crucial for the SBP’s reserves, are also under threat if uncertainties persist.
Pakistan’s currency stability could come under severe pressure as reserves decline. According to SBP’s latest payments schedule, around $5.3 billion is due to be repaid soon, including bonds, UAE deposits, and other borrowing commitments.
March alone saw $227 million exit from treasury bills, with only $19 million in fresh inflows—a stark sign of eroding investor confidence. The largest withdrawals were repatriated to the United Kingdom ($281 million), followed by the UAE ($209 million), Bahrain ($170 million), Singapore ($77.6 million), and the US ($32 million).
With foreign investments fleeing and major deposits at risk, Pakistan’s financial stability faces a critical test—raising urgent questions about the country’s ability to maintain currency strength and market confidence.
Pakistan’s foreign direct investment falls 43.3pc in July–December 2025
