94pc of foreign investment withdrawn from Pakistan’s T-bills since US-Iran war started

Escalating geopolitical tensions in the Middle East have driven a sharp withdrawal of foreign investment from Pakistan’s Treasury bills, with analysts warning that recovery may remain elusive if instability persists.

According to latest data released by the State Bank of Pakistan (SBP), overseas investors have largely exited Pakistan’s domestic debt market, once a favored destination due to its comparatively high yields. Despite a recent increase in T-bill returns to nearly 12 per cent, aimed at attracting capital, more than 94 per cent of foreign holdings had been pulled out by mid-April.

Market participants attribute the outflows to heightened uncertainty stemming from ongoing tensions between Iran and the United States, which have disrupted energy markets and intensified economic pressure on import-dependent countries like Pakistan. The country’s weekly oil import bill has surged significantly, further dampening investor sentiment.

Between July and mid-April of the current fiscal year, total inflows into T-bills stood at $975 million, nearly offset by $917 million in outflows, leaving only a modest net investment. However, analysts note that Pakistan has met key external obligations, including substantial debt repayments and profit repatriation, which could support investor confidence once regional conditions stabilise.

Experts suggest that a resolution to the conflict could revive foreign interest, especially as Pakistan re-engages with global capital markets. Meanwhile, higher interest rates and improved yields may continue to attract domestic investors, even as foreign participation remains subdued.