Foreign investors bought Pakistan Investment Bonds worth $509.2 million in the first four months of the 2026-27 financial year, the highest inflow for the July to October period, according to State Bank of Pakistan data reported on 10 November.

October alone accounted for $251 million of the buying, close to half of the four-month total. Inflows into short-term treasury bills reached $238 million over the same period, taking total foreign investment in domestic bonds and the equity market to $872 million.

UAE leads the buying

The United Arab Emirates emerged as the largest investor, contributing $395.7 million to Pakistan Investment Bonds. Bahrain was the second-largest buyer of the longer-dated bonds with $80 million, and it also invested $72 million in treasury bills. The United Kingdom was the largest investor in treasury bills, with inflows of $80 million.

Foreign investment in the equity market remained the smallest category, at $124.4 million during the four months.

High returns draw the money

Domestic debt instruments have become more attractive since the State Bank raised its policy rate by 50 basis points to 12 per cent on 26 October. The benchmark six-month treasury bill now offers a return of 12.54 per cent, among the highest in the region.

Financial sector experts say the returns are attracting both foreign and domestic investors. Some analysts say Pakistanis may also be investing in domestic bonds through overseas accounts to benefit from the high returns and relatively low investment risks.

The country’s continued engagement with the International Monetary Fund has helped maintain economic stability and reduce investment risks, while the exchange rate has remained broadly stable for more than a year.

Concerns over private lending

Financial experts warn, however, that attractive government bond returns could crowd out private-sector borrowing, as banks find little incentive to lend to businesses at comparatively lower returns. The government has been urging banks to expand financing for small and medium enterprises and the housing sector, but lending growth in both areas remains sluggish.

Despite expectations of $45 billion in workers’ remittances during the current financial year, the government and the central bank continue to explore additional sources of foreign exchange.

What the figures cover

Pakistan Investment Bonds are the government’s longer-dated securities, with maturities stretching from two to ten years or more, while treasury bills are short-term instruments. The figures reported are investment flows recorded in the State Bank’s data, and they should not be read as net foreign investment, since they do not deduct sales or outflows over the same period. The inflows nevertheless point to growing foreign appetite for Pakistani government debt at a time when the country is seeking fresh sources of foreign exchange alongside remittances and its IMF programme.