Pakistan’s investment woes deepen as SIFC struggles to restore confidence

Pakistan’s investment climate continues to deteriorate, with new data and policy assessments indicating that the country remains unable to attract meaningful domestic or foreign capital despite repeated reform initiatives.

At around 13.1 per cent, Pakistan’s investment-to-GDP ratio is among the lowest in the region, far below the regional average of more than 30 per cent. Economists say such a wide gap points to deep-rooted structural weaknesses rather than temporary economic disruptions, undermining growth, productivity and competitiveness.

The persistent slump has cast serious doubts over the effectiveness of the Special Investment Facilitation Council (SIFC), launched two years ago to fast-track large investments and cut through bureaucratic bottlenecks. Backed by both civilian authorities and the military leadership, the SIFC was projected as a game-changing platform to revive Pakistan’s slowing economy and rebuild investor confidence.

However, nearly two years on, expectations have not translated into results. Despite high-profile meetings, overseas roadshows and repeated announcements, the council has failed to generate substantial investment inflows. Many of the projects showcased under its banner remain confined to discussions, with little evidence of execution on the ground.

Investor sentiment, analysts note, has shown minimal improvement. Even within policymaking circles, there is growing acknowledgment that the SIFC has fallen short of its stated objectives. Yet there are few signs of a fundamental rethink of the strategy underpinning the council.

Speaking recently at a Pakistan Business Council conference in Islamabad, the SIFC’s national coordinator conceded that foreign investors are unlikely to commit capital unless confidence among domestic investors is first restored. He suggested that the government would now focus on offering greater support to large local business groups to stimulate activity.

Critics argue that this shift risks repeating old mistakes. They say preferential treatment for a narrow set of influential businesses entrenches an uneven playing field—one of the very factors that has discouraged investment for decades.

Instead of addressing systemic issues, such as regulatory uncertainty, inconsistent taxation and weak contract enforcement, the approach is seen as deepening distortions in the economy.

Pakistan’s investment model has long been characterised by selective incentives and ad hoc concessions, benefiting well-connected firms while the wider private sector struggles with red tape and policy unpredictability.

Analysts contend that rather than reforming these fundamentals, the SIFC has effectively institutionalised this model by creating a parallel decision-making channel that bypasses existing systems instead of fixing them.

As capital inflows remain subdued and confidence fragile, economists warn that Pakistan’s investment crisis is unlikely to ease unless structural reforms replace headline-driven initiatives.

With IANS inputs