A Tale of Two Economies: FDI Plummets 43% While KSE-100 Nears 190,000 Milestone.

Pakistan’s economic landscape presents a striking contrast as Foreign Direct Investment (FDI) plummeted by 43.3% to $808.1 million during the first half of FY26. While China and Hong Kong remain the primary contributors, accounting for roughly 73% of total inflows, the communications industry faced a massive $411.4 million outflow largely driven by major divestments in the telecom sector.

In sharp contrast to the cooling foreign interest, domestic indicators are showing remarkable resilience. The stock market continues its record-breaking streak, with the KSE-100 index briefly crossing the 190,000 mark on January 26, 2026. Simultaneously, Large-Scale Manufacturing (LSM) has surged by 6% in the first five months of FY26, reaching its highest growth levels since 2016.

Supported by robust remittances of $19.7 billion and moderating inflation at 5.6%, the economy is maintaining a consolidated fiscal surplus of 0.8% of GDP. This path forward suggests a “homegrown” recovery, where domestic productivity and regional support act as the primary engines of growth despite persistent vulnerabilities in attracting long-term global capital.