Assessing the Impact of Social Unrest and Legal Reforms on Pakistan's Investment Climate

In 2025, Pakistan finds itself at a crossroads where social unrest, legal reforms, and investor sentiment intersect in complex ways. The country's struggle with honor killings—a practice rooted in patriarchal traditions and tribal justice systems—has sparked viral outrage, forcing the government to confront a crisis that threatens both its moral standing and economic prospects. For investors, the interplay between public sentiment, legal enforcement, and political stability offers a critical lens through which to assess Pakistan's evolving investment climate.

The Catalyst: Viral Outrage and Political Reckoning

The killing of Bano Bibi and Ehsan Ullah in Balochistan in early 2025 became a flashpoint. A graphic video of their extrajudicial execution, ordered by a tribal leader, went viral on social media, igniting nationwide protests. Hashtags like #JusticeForCouple and #HonourKilling trended globally, pressuring Prime Minister Shehbaz Sharif's administration to act. While 13 individuals were arrested and investigations launched, the case underscored the fragility of legal enforcement in regions dominated by jirgas (tribal councils).

Such incidents reveal a paradox: while the government publicly condemns honor killings, its reliance on tribal elites for governance in areas like Balochistan and Khyber Pakhtunkhwa weakens its ability to enforce reforms. The 2016 anti-honor killing law, which mandates life imprisonment, remains underutilized, particularly in rural areas where jirgas operate with impunity. This duality—of state rhetoric versus on-the-ground reality—fuels public distrust and risks eroding political stability.

Legal Enforcement and Investor Confidence

The persistence of honor killings highlights systemic flaws in Pakistan's legal framework. Despite the 2016 law, loopholes such as the possibility of family pardons and lenient judicial outcomes allow perpetrators to evade punishment. For example, in 2024, 346 honor killings were reported, with many cases dismissed due to familial reconciliation or procedural gaps. This lack of accountability signals to investors a weak rule of law, a red flag for foreign direct investment (FDI).

Data from the Human Rights Commission of Pakistan (HRCP) and the World Bank suggests a correlation between weak legal enforcement and declining FDI. While Pakistan's FDI inflows have remained modest—averaging $1.2 billion annually in 2022–2025—countries like Bangladesh and Vietnam, which prioritize gender equality and legal transparency, have attracted significantly more capital. Investors are increasingly wary of environments where human rights violations persist, as such issues can disrupt supply chains, deter skilled labor, and invite reputational risks.

Political Stability and the Shadow of Unrest

Social unrest over honor killings also tests the government's political stability. The February 2024 elections, which brought Shehbaz Sharif to power, were marked by voter concerns over security and governance. However, the Sharif administration's crackdown on journalists, activists, and opposition figures—coupled with its ambivalence toward tribal power structures—has eroded public trust. In 2025, at least 220,000 Afghan refugees were deported, and 74 people died in Balochistan Liberation Army attacks, further destabilizing the country.

For investors, political instability is a major risk. A government unable to address social grievances or quell unrest is unlikely to create a conducive environment for long-term investment. The recent arrests of journalists and the use of colonial-era sedition laws to silence critics exemplify a broader pattern of repression that could deter foreign firms seeking stable operating conditions.

Opportunities Amidst the Challenges

Despite these headwinds, there are glimmers of hope. The viral outrage over honor killings has, for the first time, forced a national conversation about gender-based violence and the need for systemic reform. If the government follows through on promises to dismantle jirgas and strengthen enforcement, it could signal a shift in priorities. For instance, the Aurat Foundation's advocacy for women's shelters and legal aid programs has gained traction, offering a blueprint for scalable solutions.

Investors with a long-term horizon might consider sectors less sensitive to political instability, such as renewable energy or technology. Pakistan's energy deficit remains acute, and its solar potential is among the highest in Asia. Similarly, the rise of digital activism and e-commerce—exemplified by TikTok influencers like Sana Yousaf, whose murder reignited debates—suggests growing tech adoption.

However, timing is crucial. The KSE's volatility, as seen in its 15% drop following the Bano Bibi case, reflects investor uncertainty. Until there is tangible progress on legal reforms and political stability, capital is likely to remain cautious.

Conclusion: A Delicate Balancing Act

For now, Pakistan's investment climate remains a gamble. The government's response to honor killings—whether it doubles down on tribal alliances or embraces systemic reform—will determine its trajectory. Investors must weigh the risks of instability against the potential for policy shifts. In the short term, capital may flow to resilient sectors like renewables. In the long term, however, Pakistan's ability to attract sustained FDI will depend on its willingness to address the root causes of unrest and build a legal framework that enforces justice, not merely proclaims it.

In this context, patience and pragmatism are key. The road to reform is long, but the stakes—both for Pakistan's people and its investors—are too high to ignore.