Pakistan-India Tensions Fail to Deter Foreign Investment in Treasury Bills

Despite heightened Pakistan-India tensions following a military escalation in May 2025, foreign investment in Pakistan’s treasury bills (T-bills) has remained resilient. Data from the State Bank of Pakistan indicates that T-bill inflows reached $73.6 million in May, with the United Arab Emirates contributing the largest share at $50 million. However, the same period saw a net outflow of $66 million, primarily from Britain, reflecting mixed investor sentiment amid geopolitical uncertainty.

The brief conflict, sparked by an Indian military operation on May 6, did not significantly disrupt Pakistan’s financial markets. While equity markets experienced higher outflows due to risk aversion, the stability of T-bill investments suggests confidence in Pakistan’s short-term debt instruments. Analysts note that the predictable returns of T-bills, coupled with Pakistan’s efforts to stabilize its economy, have sustained foreign interest despite the regional tensions.

Posts on X highlight contrasting narratives: some claim Pakistan faced substantial economic losses, estimating $18–22 billion in damages due to the conflict, while others emphasize Pakistan’s diplomatic gains, noting a ceasefire and international recognition of its restraint. These perspectives underscore the complex interplay of economic and geopolitical factors shaping investor decisions.

The broader context of Pakistan-India tensions, including disputes over the Indus Waters Treaty and cross-border incidents, continues to pose risks to regional stability. Yet, Pakistan’s ability to maintain foreign inflows into T-bills signals economic resilience, even as both nations navigate a delicate post-conflict landscape.

Published in SouthAsianDesk, June 25th, 2025

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