On January 27, the Federal Constitutional Court (FCC), in a landmark ruling, endorsed retrospective taxation—departing from long-standing constitutional jurisprudence that had held the line against it.
On February 9, the National Electric Power Regulatory Authority (Nepra) drastically altered the contractual terms for all existing and future net-metered solar consumers.
On February 26, the FCC ruled that tax authorities may conduct raids and searches of taxpayers’ premises — even when no proceedings are pending against them.
Three dates. Three decisions. Three signals.
Signal 1: Rules can change after you invest. Signal 2: Contracts can be rewritten after you sign. Signal 3: Your premises can be searched even when you are not under notice.
Red alert: Capital reads signals faster than citizens do.
How will capital read these signals? Read 1: Retrospective taxation tells investors that yesterday’s numbers are not final. Read 2: Solar contract revisions tell investors that today’s agreement is provisional. Read 3: No-proceedings raids tell investors that compliance does not guarantee certainty.
The SIFC claims “enormous potential”. The SIFC invites investors to “step into a panorama of possibilities — a holistic canvas promising diverse growth & innovation for visionary investors”.
The SIFC tells investors that Pakistan is the “fifth most populous country with a median age of 20.6 years, our youthful talent pool stands ready to drive innovation, making Pakistan your ideal investment destination.”
Lo and behold, investment is not attracted by slogans — it is attracted by predictability.
The Board of Investment claims that “Pakistan offers liberal investment regime” and that the “focus of all reform efforts is to facilitate investment”.
Red alert: Capital does not argue with courts — it leaves. Assets do not argue with regulators — they shift.
Fact: Foreign direct investment (FDI) in Pakistan showed a sharp, severe decline in the first seven months of the 2025-26 fiscal year (July-Jan), with net FDI plummeting 43 per cent to $981 million compared to the same period last year. Vietnam: $30+ billion. Indonesia: $20+ billion. Pakistan’s investment-to-GDP ratio: around 13–14 percent. Emerging Asia average: 25-30 percent.
Retrospective taxation and contract revision directly increases risk premium and the cost of capital. And, if the cost of capital rises even 2-3 percentage points, many marginal projects become unviable.
For Pakistan, investment is not optional — it is arithmetic. Pakistan’s public debt exceeds 70 per cent of GDP and annual interest payments exceed Rs 8 trillion. At 3.0 per cent growth, debt ratios stagnate. At 5-6 per cent sustained growth, debt stabilises. Without investment, 5.0 per cent growth is fantasy.
Pakistan is promising certainty in brochures while legislating uncertainty in practice.
Investment does not demand slogans. Investment demands contracts that mean what they say. If rules move after capital moves, capital will stop moving.
The question is no longer whether we want investment — we cannot do without it. The real question is whether our institutions are willing to behave in a way that allows it.
The writer is an Islamabad-based columnist.
