KARACHI: Foreign investors are leaving Pakistan T-bills at an alarming rate in 2026 as the Gulf war between Iran and the United States destroys regional confidence, financial experts warned Thursday. The damage now runs so deep that recovery appears impossible as long as the conflict continues..
State Bank of Pakistan data confirms the scale of the exodus. Foreign investors poured $9https://focuspakistan.net.pk/75 million into Treasury Bills between July 1 and April 17 of fiscal year 2025–26, but pulled out $917 million over the same period leaving a razor-thin net investment of just $58 million. More strikingly, over 94% of all foreign T-bill holdings left Pakistan by April 17 alone.
Why Foreign Investors Leaving Pakistan T-Bills Accelerated
Pakistan offered some of the highest bond returns in the region. The SBP even raised T-bill yields by up to 83 basis points just days ago, pushing returns close to 12%. Nothing worked. Geopolitical fear proved stronger than financial incentive.
“Threats and counter-threats between Iran and the United States created a wide range of uncertainties,” said money market expert S.S. Iqbal. “Significant disruptions to oil and gas supplies already jeopardised fragile economies like Pakistan’s.”
The oil import bill tells the full story. Pakistan now spends $800 million per week on oil imports — nearly triple the $300 million weekly bill before the Middle East conflict erupted. That surge tears directly into Pakistan’s foreign exchange reserves and fiscal stability.
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Where the Money Went
SBP data reveals that the UK received the largest outflow of $291 million, followed by the UAE at $271 million. Bahrain accounts for $218 million in exits, Singapore for $77 million, and the US for $32 million.
Notably, Chinese investors never entered the T-bill market despite the exceptional returns. China remains Pakistan’s largest foreign investor and biggest trade partner, overtaking the UAE in recent years. Pakistan now courts Chinese capital through a planned $250 million Panda bond issuance in China’s domestic market instead.
Pakistan Still Meets Its Obligations
Despite the capital flight, experts highlight Pakistan’s financial resilience. The country repaid $3.5 billion to the UAE, cleared $1.4 billion against Eurobond maturity, and allowed $1.8 billion in profit and dividend repatriations during the first nine months of FY26 all without defaulting on a single commitment.
Pakistan also returned to international capital markets, successfully raising $750 million. That achievement signals underlying credibility even amid the crisis.
“Pakistan holds a strong position compared with other regional countries,” Iqbal said. “It built good relations with all major global powers and Gulf states. Foreign investment will surge in the post-war era.”
With foreign money gone, Pakistan redirects its strategy inward. The SBP raised the benchmark interest rate by 100 basis points to 11.5%, just above April’s inflation reading of 10.9%. Domestic investors responded strongly offering Rs3.8 trillion in the latest T-bill auction.The bond market survives. But without peace in the Gulf, foreign capital stays away.
