Nearly 90 percent of foreign investment in Pakistan’s domestic bond market has exited, according to the latest data released by the State Bank of Pakistan, highlighting growing concerns over external economic conditions and geopolitical risks.
Despite treasury bill yields rising to around 11.5 percent, foreign investors have largely pulled out, with ongoing regional tensions particularly the Iran–Israel conflict dampening appetite for Pakistani debt instruments.
During the first nine months of fiscal year 2026:
- Total foreign inflows into government securities stood at $886.7 million
- Outflows surged to approximately $794 million
- Leaving only about $93 million remaining in net investment
In March alone, $227 million exited treasury bills, compared to just $19 million in fresh inflows.
The largest withdrawal came from the United Kingdom, with $281 million repatriated. This was followed by the United Arab Emirates ($209 million), Bahrain ($170 million), Singapore ($77.6 million), and the United States ($32 million).
Risks to Economy and Currency
While analysts say bond outflows alone may not immediately destabilize the economy, a bigger concern lies in the potential withdrawal or non-renewal of deposits from friendly countries.
Uncertainty surrounds a $2 billion deposit from the UAE, which is reportedly nearing maturity, while key deposits from China and Saudi Arabia are also under scrutiny.
According to SBP’s latest payment schedule, Pakistan faces external obligations of around $5.3 billion, including bonds, deposits, and other borrowings.
Economists warn that continued outflows and declining reserves could increase pressure on the Pakistani rupee and complicate external financing needs. However, much will depend on upcoming inflows, including expected support from international lenders.
