KARACHI: Pakistan’s Finance Adviser Khurram Schehzad said on Wednesday that foreign investors pulling out of the country’s markets reflects a long-term trend, which financial analysts attributed to geopolitical shocks due to prevailing uncertainty over the Middle East war, as investors sold bonds and equities worth $302 million this month.
Data from Pakistan’s central bank showed that foreign investors sold $184.3 million in treasury bills, $13.2 million in Pakistan Investment Bonds and $104.2 million of their portfolios at the Pakistan Stock Exchange (PSX) by Mar. 13. The cumulative inflows during the same period stood at $26.2 million. The data showed that investors from the UK and the US were the largest sellers, withdrawing $120 million and $62 million, respectively, from Pakistani bonds and equity markets.
Investors from Bahrain withdrew $34 million while those from Singapore pulled out $28 million. From Luxembourg, investors withdrew $22 million, from the UAE $16 million and from Australia, investors withdrew $9.31 million.
The State Bank of Pakistan’s (SBP) data showed that investors from Belgium withdrew $6.24 million, those from the Cayman Islands pulled out $2.72 million, while Canadian investors withdrew $1.51 million and those from Sweden pulled out $1.27 million from Pakistani markets.
Investors from the US pulled out $22.6 million from Pakistani bonds and equity markets in a single-day trade on March 13, the data showed.
Pakistan’s finance ministry spokesperson Qamar Sarwar Abbasi did not respond to Arab News’ request for comments. However, Adviser to the Finance Minister Khurram Schehzad said the outflows presented an old trend.
“If you look at the trend, foreign selling, especially from equities, has been there since many years now and has the least to do with anything current,” Schehzad told Arab News.
Amreen Soorani, the head of research at Pakistan’s largest Shariah-compliant mutual fund Al Meezan Investments Management Limited, said geopolitical shocks were responsible for the prevailing uncertainty.
“Geopolitical shocks inevitably elevate market uncertainty, which is not what any capital market participant wants,” Soorani said.
Pakistan fears the Middle East war can hurt its prospects of achieving macroeconomic stability if it continues for long. Pakistan increased the prices of fuel and diesel by Rs55 per liter this month, while the benchmark KSE-100 Index has declined by 6 percent to 158,313 points since Feb. 27, official data shows.
“Various market segments, along with foreigners, have been sellers in the last few weeks, which has made the index correct to more than 15 percent (since the latest record),” Soorani noted.
The economist, however, said foreigners quitting Pakistani markets was not a new trend.
“Foreign investors have continued to sell since some years now, declining their market share in Pakistan,” she said.
SBP annual data indicate that foreign investors were net sellers of Pakistan’s bonds and equities, with outflows totaling $1.52 billion, an increase of over 20 percent compared to $1.18 billion in purchases recorded so far this fiscal year.
Adnan Sami Sheikh, vice president of research at the Pakistan Kuwait Investment Company Limited, agreed. He said foreign investors have been selling their assets in Pakistani markets since before the Middle East war started.
“The interest rates were high, so they invested in Pakistan bonds,” Sheikh explained. “Now interest rates in Pakistan have halved and come down from 22 percent to 10.5 percent so foreign investors chose to take out money rather than roll over at lower rates.”
Sheikh said foreigners were pulling out from frontier and emerging markets across the board “because of the risk of trade and are now moving to US dollar-based assets.”
“That’s not specific to Pakistan,” he added.
When asked whether the foreign outflows from Pakistan would impact investor sentiment in the country, Sheikh said he was unsure it would. The financial expert noted that foreign ownership in Pakistan has been declining for a long time.
“So, it would not have much bearing on investor sentiment and the country’s overall economy,” he said, adding that the $20 million single-day US outflows was “not a big number.”
REMITTANCES, QUOTAS
Sheikh, however, warned that if the war continued, Pakistan could face multiple shortages and price increases as most of the country’s goods pass through the Middle East.
”The majority of our remittances come from the GCC (Gulf Cooperation Council),” he said. “Prolonged slowdown there would impact jobs there and would slow down remittances.”
Saudi Arabia remains the largest source of Pakistan’s worker remittances. For the current financial year ending in June 2026, Islamabad is targeting $42 billion in remittances to help strengthen its balance of payments.
“This [conflict] would create a dollar shortage in Pakistan and the balance of payment issue would emerge again,” Sheikh warned.
To cope with the situation, Sheikh said Pakistan would have to impose controls, quotas and rationing.
“The dollar rate would slip, inflation would surge and interest rates would rise,” he said.
Despite regional tensions, Pakistan has been able to keep its exchange rate stable at around Rs279 per dollar.
Consumer prices, however, are rising, prompting Pakistan’s central bank to keep interest rates unchanged at 10.5 percent earlier this month.
