Geopolitical tensions in the Middle East have triggered a significant withdrawal of foreign investment from Pakistan’s Treasury bills, raising concerns among analysts that recovery may be difficult if instability continues. Data from the State Bank of Pakistan (SBP) reveals that international investors have largely exited the country’s domestic debt market, which was previously attractive due to its relatively high returns.
Despite efforts to lure capital by increasing T-bill yields to nearly 12 percent, more than 94 percent of foreign holdings had been pulled out by mid-April. Market experts link these outflows to the ongoing conflict between Iran and the United States, which has unsettled energy markets and intensified economic challenges for import-reliant nations like Pakistan. The country’s weekly oil import bill has risen sharply, further weakening investor confidence.
From July to mid-April of the current fiscal year, inflows into T-bills totaled $975 million, almost entirely offset by $917 million in outflows, resulting in only a small net investment. Nonetheless, analysts highlight that Pakistan has fulfilled major external commitments, including significant debt repayments and profit repatriation, which could help restore investor trust once regional tensions ease.
Experts emphasize that a resolution to the US-Iran conflict could reignite foreign interest, particularly as Pakistan seeks to re-enter global capital markets. Meanwhile, elevated interest rates and improved yields may continue to attract domestic investors, even as foreign participation remains limited amid ongoing uncertainty.
