Gulf War Triggers Foreign Investment Outflows from Pakistan

The ongoing Gulf conflict has added pressure on Pakistan's financial markets, with foreign investment in domestic debt remaining weak during the first 10 days of FY27. According to State Bank of Pakistan (SBP) data, no investment was received from Gulf countries during the period, while Bahrain withdrew $30 million from Pakistan's domestic bonds.

 

The data showed Bahrain pulled out $21 million from Treasury Bills (T-bills) and another $9 million from Pakistan Investment Bonds (PIBs), resulting in a net outflow of $30 million. Luxembourg was the only foreign investor during the period, investing $4 million in T-bills.

 

The renewed regional conflict has heightened uncertainty, affecting investor sentiment and limiting capital inflows into Pakistan. While remittances from Gulf countries have remained unaffected so far, market experts warn that a prolonged conflict could eventually impact overseas inflows, a key source of foreign exchange for the country.

 

Analysts also cautioned that ongoing geopolitical tensions, combined with domestic security concerns and sluggish exports, could further dampen investment prospects and weigh on Pakistan's economic growth.