New Delhi, July 1 (AHN) Regional instability and geopolitical uncertainty continue to weigh on Pakistan's financial markets and investment climate, with foreign direct investment (FDI), bond inflows and foreign participation in equities declining during FY26, a report has said.

According to an analysis by Asia News Network (ANN), lingering uncertainty over tensions in the Gulf region has kept foreign investors cautious despite the recent pause in hostilities and improvements in Pakistan's foreign exchange reserves and remittance inflows.

FDI into Pakistan declined 28 per cent during the first 11 months of FY26, while the country's domestic bond market witnessed a net outflow of around $550 million, the report said.

Total outflows from domestic bonds exceeded $2 billion during the period.

Although the Pakistan Stock Exchange posted strong gains, it failed to attract sustained foreign investment.

It further highlighted the data from the State Bank of Pakistan that showed that between July 1, 2025 and June 19 foreign inflows into the equity market stood at $308 million, while outflows exceeded $1 billion.

Analysts cited in the report said geopolitical uncertainty and concerns over Pakistan's external sector continued to discourage overseas investors.

Despite stronger remittance inflows, Pakistan's external financing requirements remain elevated.

The report further noted that the country faces external debt repayments exceeding $26 billion in FY27, alongside a trade deficit of about $35 billion during the first 11 months of FY26.

Another report highlighted that Pakistan's central government debt has climbed to a record Rs 81.93 trillion after rising by Rs 1.4 trillion in April alone.

The report published in Business Recorder has shown that the latest debt figures reflect deep-rooted structural weaknesses in the country’s public finances despite repeated warnings over fiscal sustainability and rising debt levels.