Qudsia Bano

Pakistan’s net International Investment Position (IIP) recorded a deeper deficit by September 2025 as the pace of increase in external liabilities continued to outstrip the growth in foreign assets, according to the latest data released by the State Bank of Pakistan (SBP).

The IIP, which represents the stock of Pakistan’s external financial assets and liabilities at a given point in time, provides a snapshot of the country’s financial standing relative to the rest of the world. Although foreign assets registered steady growth during the period under review, the sharp rise in external obligations kept the overall position firmly negative.

By September 2025, Pakistan’s total external assets reached around $34.33 billion, up from $26.77 billion in June 2024. This growth was largely driven by an increase in reserve assets and a gradual buildup in other investment assets. Reserve assets rose significantly to $24.39 billion from $15.48 billion over the same period, reflecting improved official foreign exchange holdings.

Other investment assets — comprising currency and deposits, loans, and trade credit — also expanded. Currency and deposit holdings under this category grew from $2.95 billion in June 2024 to nearly $4.98 billion by September 2025. Financial derivatives and employee stock options remained minimal, indicating limited exposure in these instruments.

Direct investment assets stayed modest, with equity and investment fund shares at around $2.3 billion by September 2025, showing little deviation from previous levels. Portfolio investment assets, including equity and debt securities, also remained limited, highlighting Pakistan’s constrained capacity for outward investment.

On the liabilities front, however, the rise was considerably stronger. Pakistan’s total external liabilities surged to approximately $67.26 billion by September 2025, compared with $39.69 billion in June 2024. The increase was mainly driven by a sharp rise in other investment liabilities and higher direct investment inflows.

Direct investment liabilities — representing foreign investment in Pakistan — climbed to about $35.30 billion by September 2025, up from $26.85 billion in June 2024. Equity and reinvested earnings made up the majority of these liabilities, underscoring the continuing significance of long-term foreign investment in the country’s external accounts.

Other investment liabilities, including loans, currency and deposits, and trade credits, also posted notable increases. Loans remained the largest component, rising from $49.59 billion in June 2024 to over $55.56 billion by September 2025, highlighting sustained dependence on external borrowing. Currency and deposit liabilities similarly edged upward due to inflows from non-residents and financial institutions abroad.

As a result, Pakistan’s net international investment position remained deeply negative by September 2025, reflecting the substantial imbalance between external liabilities and foreign assets. While the buildup in reserve assets offered some relief, the overall picture points to a persistent structural challenge: managing rising external obligations while striving to strengthen foreign asset accumulation.

Credit: INP-WealthPk