Pakistan Sees 33.9% Drop in Foreign Direct Investment, Finance Ministry Warns of Inflation Risks

Pakistan’s **Ministry of Finance** has released its monthly economic outlook report, revealing a **33.9% decline in foreign direct investment (FDI)** and warning that rising global oil prices could increase inflationary pressure in the country.

According to the report, inflation is expected to remain between **9% and 10% in July 2026**. The ministry also cautioned that tensions between the United States and Iran pose risks to global energy prices and financial markets.

The report stated that FDI fell from **$2.477 billion** to **$1.636 billion** during the **2025–26 fiscal year**. In **June 2026**, Pakistan attracted only **$13.5 million** in FDI, while total foreign investment for the fiscal year stood at **$3.6 billion**.

The ministry reported that Pakistan’s exports declined by **4.6%** to **$30.8 billion** in FY2025–26. However, workers’ remittances rose to **$41.6 billion**, marking an **8.6% year-on-year increase**.

As of **July 17**, Pakistan’s total foreign exchange reserves stood at **$22.7 billion**, including **$17.3 billion** held by the **State Bank of Pakistan**.

The report also noted that the **Federal Board of Revenue (FBR)** collected **Rs13.01 trillion** in taxes during FY2025–26, representing a **10.8% increase** compared with the previous fiscal year. Meanwhile, the fiscal deficit remained contained at **1.6% of GDP** during the July–May period.

The Finance Ministry further warned that below-average rainfall could lead to water shortages for **Kharif crops**, potentially affecting the production of **cotton, rice, sugarcane, and maize**.

Despite these challenges, the report said **large-scale manufacturing** recorded **5.8% growth** during the July–May period.