Improving investment climate

The investment climate in Pakistan continues to struggle through a complex and often conflicting environment. The recent appointment of Changpeng Zhao (commonly known as CZ), a controversial figure due to ongoing regulatory investigations in multiple jurisdictions, as an advisor to Pakistan Crypto Council, raises alarming questions over Pakistan’s regulatory foresight.
The decision to bring an individual associated with regulatory non-compliance on an international scale into Pakistan’s nascent crypto ecosystem highlights systemic weaknesses in our approach to emerging technologies. The potential repercussions of this appointment are material, because the crypto ecosystem globally operates under the strictest regulatory oversight, especially from bodies like the Financial Action Task Force (FATF), the International Monetary Fund (IMF), and the U.S. Department of Treasury.
The integration of a figure like CZ could expose Pakistan to enhanced scrutiny under FATF’s anti-money laundering (AML) and counter-terrorist financing (CFT) frameworks. The risk is compounded given Pakistan’s recent history of being on FATF grey list. The inflow and outflow of digital assets, if improperly regulated, could jeopardize our standing with international financial institutions.
The investment environment is further complicated by the latest ambitions of the incumbent government, articulated during the Pakistan Minerals Investment Forum 2025. The Prime Minister’s rhetoric accentuated that Pakistan possesses mineral resources worth trillions of dollars, claiming these reserves could free the country from shackles of IMF loans. The narrative echoed aspirations but failed to address the deeply embedded structural barriers impeding foreign investment, especially in the mineral sector.
The government’s commitment to developing mining resources has been long-standing, but execution gaps remain wide. Announcement of the National Minerals Harmonization Framework 2025 reflects policy level activity but the ability to translate policy into predictable and stable operational mechanisms remains questionable.
The government’s expectation that mineral development could unilaterally end dependence on IMF is overly optimistic given chronic issues facing the February 2025 Monthly Report on Foreign Economic Assistance (FEA) issued by Pakistan’s Ministry of Economic Affairs provides valuable insight into Pakistan’s external financing and its disbursement patterns covering various categories including budgetary support, project financing, technical assistance, and foreign commercial loans.
The total provisional disbursement during July 2024 to February 2025 period amounted to US$4,952.77 million against budget estimates of US$19,393.16 million for fiscal year 2024-25 meaning that only about 25.5% of the budgeted foreign economic assistance materialized during this period, raising concerns about Pakistan’s ability to secure planned external inflows.
The report indicates that programme and budgetary support dominated disbursements with US$1,173.76 million being released in this category during July to February signifying government’s heavy reliance on non-project aid to meet fiscal deficits rather than securing financing for infrastructure or development-based projects.
Disbursement from multilateral sources stood at US$2,198.49 million while bilateral sources contributed US$133.71 million only. The paltry inflow from bilateral partners highlights declining confidence among traditional friendly nations, which once formed Pakistan’s backbone of foreign assistance.
Commercial borrowings segment recorded US$3,779 million disbursements, reflecting the government’s increased appetite for expensive loans from international financial institutions. Dependency on commercial loans poses serious repayment risks, especially in the backdrop of declining foreign exchange reserves and stagnant export earnings.
The Islamic Development Bank’s (IsDB’s) short-term financing facility disbursed US$265.72 million, which was critical for import of oil and LNG. Increased reliance on IsDB facilities underlines the structural energy import dependency of Pakistan’s economy.
The Naya Pakistan Certificate (NPC) scheme contributed US$1,314.79 million during the period, indicating that the government continues to lean on diaspora savings and retail investors for plugging external account deficits. The sustainability of this approach remains questionable, given rising global interest rates and better investment alternatives abroad.
The report’s project disbursement figures stand at US$2,198.49 million against a budget estimate of US$3,406.95 million for the full year. This shortfall demonstrates execution bottlenecks, bureaucratic hurdles, and possible donor disillusionment with Pakistan’s project governance Asian Development Bank (ADB) remains a prominent contributor with substantial disbursements across multiple sectors.
The Sindh Housing Flood Reconstruction Project received US$52.02 million, while the Domestic Resource Mobilization Programme recorded US$300 million disbursement. The figures reflect donor willingness to support post-flood reconstruction efforts but also their inclination to finance structural reforms like domestic resource mobilization, indicating concerns over Pakistan’s narrow tax base.
The Asian Infrastructure Investment BankAIIB contributed US$69.25 million, a figure reflecting marginal involvement despite Pakistan’s expectations from the China-backed lender. The European Investment Bank (EIB) released US$10.53 million, indicating modest participation in Pakistan’s finances.
The disbursement from World Bank’s IBRD and IDA window stood at US$217.82 million and US$642.50 million, respectively. The report shows that most of this assistance was project-tied, focusing on water resource management, energy sector reforms, and education projects. The technical assistance component remains small at US$8.84 million, highlighting Pakistan’s continued reliance on loans over technical skill transfer or capacity building initiatives.
The disturbing trend visible from the February 2025 report is growing reliance on foreign commercial loans, accounting for US$3,779 million disbursement, surpassing project disbursement figures.
Increased exposure to commercial debt markets, with higher interest costs and short maturity profiles, heightens Pakistan’s vulnerability to debt prospects. Issuance of bonds recorded US$1,000 million, again underlining government’s fiscal distress. The figures demonstrate that the international debt capital markets remain accessible but at higher coupon rates, which could create fiscal stress in future budgetary cycles.
Bilateral disbursement details show minimal support from key partners. From China, disbursements amounted to US$2.41 million only, reflecting a slowdown in China’s lending to Pakistan amidst global economic headwinds. Disbursement from Saudi Arabia remains largely in the form of time deposits rather than budgetary or project support, suggesting limited strategic engagement beyond liquidity support.
A detailed project analysis shows that US aid remains confined mostly to grants for specific projects like the Mangla Refurbishment & Upgradation Project ($31.30 million), Gomal Zam Dam development (US$0.33 million), and FATA Infrastructure Programme (US$6.73 million). Limited inflow from the US despite its status as a key trading partner, signifies strained bilateral financial cooperation.
The report also highlights that foreign economic assistance from ECO Trade Bank remained at US$100 million, while various loans from France, Denmark, and the EU contributed modest figures, mostly tied to water management or infrastructure development projects raising serious concerns about Pakistan’s geoeconomic positioning, given the country’s strategic location.
The foreign assistance report’s figures show that Pakistan’s disbursements for technical assistance, a critical factor for capacity building, remains a meagre US$8.84 million. The country’s chronic governance challenges cannot be overcome without technical expertise and human capital investment.
The report shows that out of total foreign economic assistance disbursement of US$4,952.77 million, a staggering US$4,819.05 million was secured under non-project aid. These statistics reflect a consumption-oriented borrowing approach rather than development-driven financial inflows.
The report reveals that project disbursements remained sluggish despite approved projects in the pipeline. Delays in execution send negative signals for future donors and investors, looking for efficient fund utilization.
Inclusion of disbursement data from multiple energy and infrastructure projects like the Chashma Nuclear Power Plant-5 (US$306.47 million) and Reko Diq mining project remains absent, highlighting either operational delays or ongoing negotiations without financial closures.
The government’s rhetoric of leveraging mineral resources to reduce dependence on IMF assistance will require consistent and credible policy frameworks, transparent governance, and removal of regulatory bottlenecks that plague foreign investment inflows.
The February 2025 Monthly Report starkly exposes Pakistan’s external financing vulnerabilities, dependence on non-developmental borrowings, and limited success in attracting foreign investment. The data reveals that Pakistan is operating in a debt-driven growth model, which is neither sustainable nor strategic.
Pakistan’s future investment environment overwhelmingly depends on depoliticizing economic governance, ensuring regulatory transparency, and creating a facilitative environment for both traditional and emerging sectors like crypto. Pakistan risks continued economic isolation despite its mineral wealth and strategic location for want of structural reforms and prudent financial management.
Copyright Business Recorder, 2025