New Delhi, May 23 (IANS) Pakistan is grappling with a mounting foreign exchange crisis driven by pressure to repay roughly $4.8 billion of external debt, weak investor confidence and falling foreign direct investment (FDI), a report has said.

The report from Times of Oman said that foreign direct investment plunged 33 per cent in FY26 to $1.195 billion, continuing a declining trend of $1.92 billion in 2023–24 and $1.83 billion in 2024–25. As a share of GDP, FDI remained below 0.45 per cent.

Despite policy measures, stability is dicey to sustain as Islamabad failed to build investors’ confidence.

“The dwindling confidence in the economy is also actively expressed through the exit and downsizing of several multinational firms in recent years,” the report said.

It mentioned Procter & Gamble’s decision to shut down manufacturing operations in Pakistan, along with companies such as Shell, Telenor, Uber, Yamaha, Eni, some foreign banks, and pharmaceutical firms deciding to scale down or shut operations in Pakistan.

The report mentioned labour force survey data showing the unemployment rate rising to 6.3 per cent to 6.9 per cent from 2020–21 to 2024–25, with women and youth experiencing the biggest brunt.

Pakistan’s external and fiscal vulnerabilities are apparent from public debt surging to Rs 80.52 trillion by the end of FY25, while external debt and liabilities stood at $138 billion, the report said.

“Economic growth for the last three years has averaged about 1.7 per cent. The government’s debt is worth 70 per cent of GDP, and gross financing needs are among the highest in the world,” it added.

The report flagged that the economy remained highly exposed to West Asian shocks, as Pakistan spends about 4 per cent of GDP annually on fuel and fertiliser imports from the Gulf.

Due to heavy reliance on fuel, food and gulf remittances from West Asia and Gulf, the economy is under significant strain, with Islamabad ordering austerity measures like the closure of schools and a reduced work week to deal with the oil crisis.

—IANS

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