Foreign investment in Pakistan’s domestic bonds reached $275 million during the first 70 days of the current fiscal year, despite concerns over the impact of regional conflict on investment flows.
The inflows included $151.4 million invested in Treasury Bills and $123.7 million in Pakistan Investment Bonds (PIBs) between July 1 and September 11, taking total foreign investment in domestic bonds to $275 million.
The period also saw renewed interest in long-term PIBs, with foreign investors allocating a significant portion of their funds to the securities despite heightened geopolitical risks.
The United Arab Emirates emerged as the largest source of foreign investment in Pakistani bonds during the period. UAE-based investors placed $10 million in Treasury Bills and $90 million in PIBs.
Market participants said Pakistani government bonds remained attractive to investors in the UAE because of their relatively high yields of around 12 per cent and perceived low risk. Reduced investment opportunities in some regional markets also encouraged investors with available liquidity to seek alternative destinations.
Bahrain, another country affected by regional tensions, invested $30 million in Treasury Bills during the period. The United Kingdom was the second-largest investor, with $60.7 million placed in Treasury Bills, while no investment from the country was recorded in PIBs.
US investors allocated $8.6 million to PIBs and $23 million to Treasury Bills. Luxembourg-based investors invested $19.4 million in Treasury Bills and $25 million in PIBs.
During the first 11 days of September, PIBs attracted $49.7 million in foreign investment, compared with $12 million invested in Treasury Bills, indicating stronger demand for longer-term government securities.
The trend comes alongside an increase in foreign direct investment (FDI). FDI rose 80 per cent year-on-year to $316 million in August, compared with $175 million during the same month a year earlier.
During the first two months of FY27, FDI increased 24 per cent to $494.5 million from $398.6 million in the corresponding period of the previous fiscal year.
However, market participants cautioned that the recent investment inflows may not represent a sustainable long-term trend. Much of the investment is viewed as short-term capital seeking attractive returns and the ability to exit quickly, particularly amid continuing regional uncertainty.
