Karachi, November 27, 2023 – Foreign companies operating in Pakistan have repatriated a staggering $485.40 million in profits and dividends during the first four months (July – October) of the fiscal year 2023-2024.
This figure represents a remarkable 584 percent increase compared to the same period in the previous fiscal year, according to data released by the State Bank of Pakistan (SBP) on Monday.
The stark contrast becomes evident when juxtaposed with the modest repatriation of $71.30 million during July – October of fiscal year 2022-2023. This unprecedented surge in profit repatriation comes alongside a significant uptick in foreign direct investment (FDI), which soared to $456.20 million during the same period, up from $58.50 million in the preceding fiscal year.
Notably, portfolio investment also witnessed a substantial increase in profit and dividend outflows, reaching $29.20 million in the first four months of fiscal year 2023-2024, as opposed to $12.80 million in the corresponding period of the last fiscal year.
Market sources attribute this drastic rise in profit and dividend repatriation to the State Bank of Pakistan’s (SBP) relaxation of foreign payment restrictions during the current fiscal year. In May 2022, the country had implemented measures to curb the outflow of dollars, aiming to safeguard the rupee’s value and prevent depletion of foreign exchange reserves. These restrictions included bans on the import of luxury and essential items, along with limitations on repatriation of profits by foreign companies.
However, in January of the current year, the central bank eased these conditions. While this move facilitated the release of stuck-up imported consignments through the opening of letters of credit (LCs), it also inadvertently enabled foreign companies to repatriate profits to their parent companies abroad.
Official data further reveals that companies from the United Arab Emirates (UAE) led the pack in profit repatriation, sending a substantial $99 million back home during the first four months of the current fiscal year, compared to a meager $8.30 million in the corresponding months of the last fiscal year. Companies from the United Kingdom and the United States also engaged in significant repatriation activities, with amounts totaling $62.1 million and $25.9 million, respectively.
In terms of sectors, the most notable repatriation occurred in the food and transport industries, where outflows of $68.40 million and $67.20 million were recorded, respectively.
While the surge in repatriation signifies a newfound confidence or necessity among foreign companies, it raises questions about the impact on Pakistan’s economy and the efficacy of the measures taken by the central bank. Analysts and stakeholders will be closely monitoring the unfolding situation to assess the implications and potential adjustments in the country’s economic policies.
