What happened
The war in the region has almost wiped out foreign investment in Pakistan’s domestic bonds, leaving little chance of recovery while the current situation prevails, financial experts said, according to Dawn on 3 May 2026.
State Bank of Pakistan (SBP) data showed that foreign investors have almost left the domestic bonds that had been their preferred choice because returns were the highest in the region and very high compared with most other countries. A day earlier, the central bank had raised the yields on Treasury Bills by up to 83 basis points to almost 12 per cent, making them more attractive to investors.
The SBP data showed that over 94 per cent of foreign investment in T-bills had left the country by 17 April. From 1 July to 17 April in the 2025-26 fiscal year, inflows into T-bills were $975 million and outflows were $917m, indicating a net investment of $58m. The highest outflows were $291m to the United Kingdom, followed by $271m to the United Arab Emirates, $218m to Bahrain, $77m to Singapore and $32m to the United States.
Why it matters
The outflow reflects how the Middle East conflict has unsettled Pakistan’s finances. The war has disrupted oil and gas supplies from the region, and the oil import bill has risen to $800m per week from $300m before the conflict. Threats and counter-threats between Iran and the United States have added uncertainty, and KhabarWire has reported on the return of double-digit inflation and on the State Bank’s 100 basis point rate increase.
The article noted that Pakistan had repaid $3.5bn to the UAE, settled $1.4bn against Eurobond maturity, and allowed outflows of profits and dividends from foreign investments amounting to $1.8bn during the first nine months of the fiscal year. Money market expert S.S. Iqbal said Pakistan had re-entered the international market and raised $750m, arguing that foreign investor confidence would jump once the Gulf war ended and that large foreign investments could follow in the post-war period.
What is still uncertain
Experts did not say when foreign investors might return, and the outcome of the stalled talks between Iran and the United States remains unresolved. The SBP has not given forward guidance on T-bill yields beyond the most recent auction, in which Rs3.8 trillion was offered. Financial experts also noted that Chinese investors never entered the domestic bond market, and that Pakistan is instead seeking to enter China’s financial market through a $250m Panda bond issuance.
Sources & reporting notes
This is a synthesis of published material, not eyewitness reporting. Sources were reviewed on 2026-05-03.
- Primary source — Dawn: “Foreign investors exit T-bills”3 May 2026 · Reports State Bank data on the 94pc foreign exit from T-bills by 17 April, the outflows by country, the oil import bill and the repayment figures.
