The country witnessed a sharp dip in foreign direct investment (FDI) in May 2025, furthering concerns over investor confidence amid ongoing economic challenges. According to the State Bank of Pakistan (SBP), net FDI for the month stood at $194 million, marking a 37 percent decline compared to May 2024, when it had reached $307 million. The drop breaks a recent upward trend seen earlier in FY25 and has contributed to a slower cumulative FDI performance for the fiscal year. Over the first eleven months of FY25 (11MFY25), the country attracted $1.979 billion in net FDI, a 7.5 percent decrease from the $2.142 billion recorded during the same period in FY24. While gross inflows during 11MFY25 remained relatively resilient at $2.893 billion (compared to $2.922 billion in 11MFY24), the increase in outflows—rising to $914 million from $780 million—eroded the overall net gains.
The monthly net FDI trajectory from May 2024 to May 2025 illustrates a volatile pattern. September and November 2024 were high points, with net inflows exceeding $400 million. However, the following months showed considerable moderation, and March 2025 was especially poor, dipping below $100 million. Although some recovery was seen in April and May 2025, the figures failed to regain earlier momentum, with May standing well below the average monthly inflow needed to meet annual targets.
Sectoral data from the SBP shows that the power sector continued to dominate FDI inflows, attracting $945 million in gross inflows and recording $562.8 million in net FDI over 11MFY25, though this was lower than the $613.2 million recorded in the same period last year. Within the power sector, hydel power remained the top sub-segment, with $405.2 million in net inflows, while coal and thermal followed with $129.8 million and $27.7 million, respectively. Other sectors recorded mixed performances. Financial businesses received $628.9 million in net FDI, up from $570.4 million in 11MFY24, while oil and gas exploration saw net inflows of $320.8 million, marginally lower than the $326 million seen last year. The communications sector reported a net outflow of $69.1 million, largely due to significant repatriation from the telecom sector.
FDI data by country shows that China remained Pakistan’s largest investor, with $790.4 million in net inflows during 11MFY25—up from $598.6 million last year. The United Kingdom, Hong Kong, and Switzerland followed with inflows ranging from $178 million to $229 million. Despite these contributions, total net FDI from the top ten investing countries only marginally improved, rising from $1.634 billion in 11MFY24 to $1.766 billion in 11MFY25, masking underlying sectoral shifts.
The decline in May’s FDI figures signals growing investor hesitation. While cumulative inflows are near last year’s levels, rising outflows and an uneven sectoral performance reflect an unstable investment climate. With elections on the horizon and macroeconomic reforms underway, sustaining investor interest will require policy stability, improved ease of doing business, and streamlined profit repatriation processes. If May’s trend continues, Pakistan risks closing FY25 at a much lower level, highlighting the need for structural reforms and targeted international economic engagement.
