By Moaaz Manzoor

Foreign investment in Pakistan rebounded sharply to $445.95 million in May 2026 after recording net outflows in the previous two months, driven by stronger foreign direct investment (FDI) and a recovery in portfolio inflows, according to data released by the State Bank of Pakistan (SBP).

The latest figures mark a significant turnaround from net foreign investment outflows of $379.05 million in April and $285.35 million in March, indicating improved investor confidence and renewed foreign interest in Pakistan's economy.

Data released by the SBP show that foreign private investment reached $197.79 million in May, up from $55.16 million in April. The increase was primarily driven by higher FDI inflows, which rose to $214.29 million from $54.46 million a month earlier.

Gross FDI inflows stood at $295.07 million in May, compared with $273.38 million in April. At the same time, FDI outflows declined sharply to $80.78 million from $218.92 million, helping lift net FDI to its highest level in three months.

The improvement suggests that foreign investors expanded their investment commitments while profit repatriation and capital withdrawals moderated during the month.

Portfolio investment by the private sector, however, remained negative. The segment recorded a net outflow of $16.5 million in May, although this was a marked improvement from outflows of $184.66 million in March and $78.04 million in February.

A major contribution to the recovery came from foreign public investment, which recorded a net inflow of $248.16 million during May after posting outflows of $434.21 million in April and $268.33 million in March.

The inflow was entirely concentrated in debt securities, reflecting renewed foreign participation in government debt instruments. Foreign public portfolio investment recorded inflows of $199.16 million in January and $51.17 million in February before turning negative in March and April.

Overall, foreign investment remained volatile during the first five months of 2026. The country recorded net inflows of $310 million in January and $186.65 million in February before investor sentiment weakened in March and April amid external uncertainties and portfolio outflows.

The May recovery brought total foreign investment to its highest monthly level since January and reversed much of the weakness recorded during the preceding two months.

The latest data also underscore the growing importance of FDI in supporting Pakistan's external financing needs. The rebound in May suggests that foreign investors responded positively to improving macroeconomic indicators and greater stability in the country's external sector. Higher FDI inflows, lower outflows and renewed interest in debt securities collectively helped restore overall foreign investment to positive territory.

Overall, SBP data show that Pakistan attracted nearly $446 million in foreign investment during May, with gains driven by stronger direct investment and a recovery in public-sector portfolio inflows, providing support to the country's external account and investment landscape.

Credit: INP-WealthPk