KARACHI — Rising tensions in the Gulf region have triggered a noticeable withdrawal of foreign investment from Pakistan, with millions of dollars exiting domestic bond markets in recent days, according to data released by the State Bank of Pakistan.
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The central bank’s figures show that approximately $20 million was withdrawn from domestic bonds in a single day, reflecting growing uncertainty among global investors following the escalation of conflict involving Iran. Overall, the first 13 days of March recorded a net outflow of $184.3 million, a level comparable to capital flight witnessed during the early months of the COVID-19 pandemic in 2020.
Despite not being directly involved in the conflict, Pakistan has felt the economic ripple effects, as foreign investors reassess risk exposure across the region. Analysts suggest that heightened geopolitical uncertainty is prompting investors to shift funds to safer markets.
The largest outflows during the period were linked to investors from the United Kingdom, followed by withdrawals from Bahrain, the United States, Singapore, the United Arab Emirates and Australia.
However, inflows remained limited, with only modest investments recorded from the United Kingdom and Bahrain during the same period. Economists warn that if the conflict persists, it could pose broader risks to Pakistan’s economic stability, including pressure on financial markets.
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So far, Pakistan has avoided major shocks to its currency and oil prices, even as regional currencies such as India’s have shown volatility. Meanwhile, remittance flows from overseas Pakistanis have remained stable, suggesting that workers in the Gulf are not yet panicking.
Experts caution that prolonged instability could erode investor confidence further, potentially impacting growth and financial resilience in the months ahead.