ISLAMABAD (MNN); Pakistan’s foreign direct investment (FDI) has fallen to its lowest level since 2023, reflecting growing concerns among international investors over inconsistent tax policies and an unpredictable business environment, according to a Bloomberg report.
Official data released on Friday showed that net FDI declined by 34 percent year-on-year to $1.64 billion during the last 12 months, highlighting a significant slowdown in foreign investment despite recent signs of macroeconomic stability.
Several major multinational corporations have exited Pakistan or significantly reduced their operations since the country’s economic crisis in 2022. Among them are Procter & Gamble, Telenor, TotalEnergies, Shell, Uber, and Microsoft, with some companies handing over operations to local partners while others withdrew entirely.
Abdul Aleem, President of the Overseas Investors Chamber of Commerce and Industry (OICCI), said the departure of multinational firms has caused more than financial losses. He noted that Pakistan is losing highly skilled professionals and experienced corporate leadership, weakening the country’s long-term business ecosystem.
Business executives familiar with the recent corporate exits told Bloomberg that unpredictable taxation and frequent policy changes have made long-term planning and profitability increasingly difficult. They said repeated revisions to tax laws have discouraged foreign companies from expanding their presence in Pakistan.
Pakistan currently imposes one of the highest corporate tax burdens in the region. Companies pay a base corporate tax of 29 percent, while additional levies, including employee welfare contributions and the controversial super tax, raise the effective tax burden to as much as 44 percent. Although the government marginally reduced the super tax in the latest federal budget, businesses continue to describe the tax regime as excessive.
The Pakistan Business Council and other business groups have repeatedly called for stable and predictable economic policies, arguing that Pakistan’s corporate tax rates remain significantly higher than competing regional economies such as Thailand and Vietnam.
Responding to concerns, Finance Minister’s Adviser Khurram Schehzad said the departure of several multinational companies reflects global business restructuring rather than Pakistan-specific challenges. He stated that 79 new foreign companies entered Pakistan between 2023 and 2025, compared with 19 companies that exited during the same period.
Despite improving diplomatic relations and renewed efforts to attract investment in mining, energy, oil, and digital assets, overall FDI remains weak. Chinese investment continues to dominate foreign inflows, while Saudi Arabia has also expanded its investment in Pakistan’s energy sector.
Analysts say Pakistan remains vulnerable because of its dependence on imports, particularly energy imports. The country narrowly avoided default during the 2022 economic crisis after receiving IMF assistance and financial support from friendly countries, but the resulting fiscal reforms and higher taxes have increased pressure on businesses.
The pharmaceutical sector has also witnessed several multinational exits. Pharma Bureau Executive Director Ayesha Tammy Haq said policy uncertainty, weak intellectual property protection, and declining investor confidence have contributed to medicine shortages and increased reliance on imported pharmaceutical products.
Meanwhile, overseas Pakistanis continue to provide a vital economic lifeline. Workers’ remittances reached a record $41.6 billion during the fiscal year ending in June, accounting for more than 9 percent of GDP and far exceeding both exports and foreign direct investment.
Business leaders warn that while remittances help stabilize Pakistan’s economy, they should not replace long-term reforms aimed at boosting exports and attracting sustainable foreign investment.
Pakistan Business Council CEO Javed Kureishi described the latest FDI figures as “extremely disappointing,” emphasizing that multinational companies require policy consistency and regulatory certainty to maintain long-term investments in the country.
