Vietnam moment?

PAKISTAN’S investment story has rarely had a more promising tailwind. The macroeconomic stabilisation under the 37-month Extended Fund Facility (EFF), supplemented by the Resilience and Sustainability Facility, has been more decisive than most observers expected. The fiscal deficit has narrowed to 5.4 per cent of GDP, with the primary surplus rising to a historic 2.4pc in FY25. Reserves have nearly doubled to $14.5 billion, inflation has fallen below 5pc, and successive sovereign upgrades by Fitch, S&P, and Moody’s have followed.

The geopolitical moment is unusually supportive. The sentiment in the international community, in the non-traditional, export-oriented sectors such as mining and digital & IT services, is extremely encouraging. This has reset the tone in how Pakistan engages capital. Reko Diq achieved financial closure in 2025 — a $7bn project backed by International Finance Corporation, the Asian Development Bank and financiers from the US, Canada, Japan and Saudi Arabia. It is projected to deliver $2.5bn in annual exports from 2028. After a near two-decade hiatus, the privatisation of PIA closed in December 2025. It is indeed a vote of confidence, and the precedent it sets for the Discos (electricity distribution companies) and other state-owned enterprises (SOEs) is more valuable than the transaction itself. It seems that Pakistan is positioning itself for an export-led take-off.

Yet the comparison that should focus our attention remains stark. Pakistan attracted $2.46bn in foreign direct investment in FY25; Vietnam, in the same year, disbursed over $25bn — roughly 10 times our flow into an economy whose GDP ($476bn) is only marginally larger than ours ($410bn). Vietnam’s cumulative FDI stock now exceeds $322bn, equivalent to two-thirds of GDP; ours hovers around 8pc. Our investment-to-GDP ratio sits at roughly 13pc against a regional average closer to 30pc. Private credit to GDP remains below 15pc, against over 50pc in India. These gaps reflect a risk-transmission system that has not yet matured to the level our economy now requires.

The opportunity we have now is to institutionalise the stabilisation that headline transactions have demonstrated — that Pakistan can deliver and turn into a system that does not depend on extraordinary mechanisms. Four directions would meaningfully strengthen this institutional layer.

The opportunity we have now is to institutionalise the stabilisation.

First, anchor the reform horizon in legislation. The newly established Tax Policy Office — itself an EFF deliverable — gives us the vehicle to embed core commitments in primary legislation: the National Tariff Policy 2025-30, the SEZ (Special Economic Zone) framework, the export refinance regime, and the IT and minerals policies, each with sunset clauses of no less than 10 years. This can be done within the IMF’s revenue-neutrality requirement; predictability does not cost the exchequer, but it pays back in investment, and even otherwise sets the stage for growth rates that rewrite a country’s economic destiny — the velocity at which poverty retreats and middle classes emerge, when we eventually graduate from the IMF programme.

Second, continue strengthening the regulators’ autonomy. Pakistan has made important strides here, particularly with the State Bank, whose operational independence is itself a programme commitment. Extending fixed tenures, transparent appointments and clear performance mandates to the Securities and Exchange Commission of Pakistan, the power regulator Nepra, the oil and gas authority Ogra and the Competition Commission complements the EFF’s governance agenda. Strong regulators are how we convert the SIFC (Special Investment Facilitation Council) moment into a permanent investment clime, ensuring a level playing field.

Third, advance the privatisation and SOE agenda decisively. SOEs absorbed accumulated losses topping Rs2.5 trillion — exactly the contingent liability the EFF is designed to extinguish. The PIA privatisation closure, the airport outsourcing process and the prioritised list of 27 SOEs at the Privatisation Commission are the right next moves. The idea of a Pakistan sovereign wealth fund needs a relook to ensure the governance safeguards the programme calls for, so that it enables divestment in due course rather than warehouses’ inefficiency in the interim.

Fourth, build the domestic institutional investor base — the gap the IMF programme does not directly address. Our mutual fund industry manages assets equivalent to about 4pc of GDP; in India the figure is 17pc, in Malaysia over 30pc. Pension assets here are below 2pc of GDP, against an emerging market average of around 20pc. Venture capital ecosystem is still in its infancy. Foreign investors take their cues from local ones, and this financial sector acts as a backbone to promote local entrepreneurship.

Underlying all four is a single principle: credibility is built by narrowing the gap between what is announced and what is delivered. Vietnam was poorer than Pakistan in 1990; today, its per capita income is more than double ours. The difference is not capital. It is conviction sustained over time.

This agenda is fiscally light. None of the four shifts requires loosening the primary surplus, departing from the State Bank’s monetary stance, or undoing revenue mobilisation. They are legislative and institutional reforms that cost little but signal much and make Pakistan ready for quality, sustainable investment. The macroeconomic groundwork is in place. The geopolitical alignment is rare. Lifting FDI to even 3pc of GDP — half of Vietnam’s ratio — would mean an additional $10bn in annual inflows, more than the entire current EFF disbursement. This is Pakistan’s Vietnam moment — and unlike before, the world is watching. The opportunity is to convert it into a credible, long-horizon investment story — and there is every reason to believe we can.

The writer is a senior banker.

Published in Dawn, April 30th, 2026