Karachi, Pakistan – Web Desk: Pakistan continues to record the lowest investment levels among major Asian economies, despite some improvement in macroeconomic stability, analysts and industry leaders said. Structural barriers, regulatory hurdles, and persistent trade deficits are limiting the country’s growth potential.
Bangladesh, despite facing political and economic turbulence in 2025, recorded an investment-to-GDP ratio of 22.4 percent, significantly higher than Pakistan’s 13.8 percent. Pakistan has also failed to recover its fiscal year 2022 peak of 15.6 percent, while regional peers such as India and Vietnam maintain investment levels above 30 percent.
Industry leaders say structural bottlenecks remain despite the establishment of the Special Investment Facilitation Council (SIFC). Businesses still require around 25 regulatory approvals from federal and provincial bodies to launch industrial projects, causing delays and uncertainty.
Senior business executives privately expressed frustration over the council’s performance, while analysts noted that Pakistan continues to offer conventional investment projects, often limited to memorandums of understanding (MoUs) rather than formal investment agreements.
Policy Research Institute of Market Economy (PRIME) research economist Maryam Ayub said Pakistan’s investment rate is structurally disconnected from regional trends. She noted that Pakistan’s investment-to-GDP ratio declined from 15.6 percent in FY2022 to 13.1 percent in FY2024, before rising slightly to 13.8 percent in FY2025. In contrast, India maintained 32–35 percent, Vietnam 30–33 percent, and Bangladesh around 30 percent.
Economists warn that investment levels below 15 percent significantly constrain Pakistan’s growth potential. Banking data shows government borrowing outpaced private sector credit in 2025, with government monthly borrowing ranging between PKR 30–36 trillion, while private sector credit remained limited to PKR 9.5–10.9 trillion. In several instances, government borrowing was three times higher than private sector lending.
Ayub said banks prefer lending to the government due to lower risk and higher returns, which stabilizes banks but deprives industry of financial resources.
Exports declined from $2.85 billion in October to $2.32 billion in December, while foreign direct investment (FDI) stood at $2.49 billion in FY2025, slightly higher than $1.9 billion in FY2022. However, profit repatriation reached $1.79 billion, limiting net capital inflows. FDI accounts for only 0.6 to 0.7 percent of GDP, contributing marginally to overall investment.
Economists warn that if Pakistan’s investment ratio remains below 15 percent, sustainable economic growth could remain limited to 3–4 percent, signaling prolonged economic stagnation compared with regional peers.
