Nearly 90 percent of foreign investment recently parked in Pakistan’s domestic bonds has now exited the country, according to latest data by the State Bank of Pakistan (SBP).
While treasury bill yields have climbed to around 11.5 percent, the ongoing Gulf War has overshadowed attractive returns and discouraged foreign participation.
During the first nine months of fiscal year 2026, total foreign inflows into government securities stood at $886.7 million, while withdrawals surged to roughly $794 million. This left only about $93 million (~90%) in remaining investment.
The bond outflows alone may not destabilize markets immediately. However, a far greater risk lies in the potential withdrawal or non-renewal of financial deposits held by friendly nations. Everyone now knows that the United Arab Emirates is reluctant to roll over a $2 billion deposit maturing this month.
Meanwhile, China and Saudi Arabia also maintain key deposits with SBP, but uncertainty now surrounds whether these arrangements will continue unchanged if issues persist.
Also, Pakistan’s currency stability could come under pressure if reserves decline further. As per latest SBP payments schedule, around $5.3 billion is expected to be paid off in bonds, UAE deposits and borrowings under other commitments.
In March, around $227 million exited treasury bills compared to just $19 million in fresh inflows.
The largest withdrawal $281 million was repatriated to the United Kingdom. Investors from the UAE pulled out $209 million, followed by Bahrain at $170 million, Singapore at $77.6 million, and the United States $32 million.