Foreign Investment Woes: Profit Repatriation from Pakistan Plunges by 80% in FY23

Foreign Investment Woes: Profit Repatriation from Pakistan Plunges by 80% in FY23

Karachi, July 27, 2023 – The repatriation of profit and dividends from Pakistan has seen a significant plummet of 80 percent, amounting to $331 million in fiscal year 2022-23, as reported by official data released by the State Bank of Pakistan (SBP).

In contrast, the preceding fiscal year 2021-22 recorded a total repatriation of profit and dividends at $1.68 billion, making the current decline a cause for concern among investors and policymakers alike.

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Experts attribute this sharp downturn in profit repatriation to the stringent restrictions imposed by Pakistan on the outflow of dollars, a measure taken to bolster the country’s balance of payments. This has posed challenges for multinational companies operating in Pakistan, making it difficult for them to repatriate their dividends in recent quarters due to the constraints on dollar outflows.

The Overseas Investors Chamber of Commerce and Industry (OICCI) highlighted this issue earlier in the year, shedding light on the suspension of repatriation of profits in the form of dividends to the overseas headquarters of foreign companies. This suspension has been in effect since the beginning of the 2022-23 fiscal year and has affected multinational companies across all sectors and sizes. Prior to April 2022, this problem was not prevalent, according to a survey conducted among OICCI members.

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The decline in profit and dividend repatriation also extended to Foreign Direct Investment (FDI), experiencing an 82 percent drop to $267.5 million during fiscal year 2022-23, compared to $1.52 billion in the previous fiscal year. Similarly, repatriation of profit and dividends related to foreign portfolio investment (FPI) also witnessed a decline, reaching $63.5 million during the reviewed period, as opposed to $156.2 million in the corresponding period of the previous fiscal year.

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The decline in profit repatriation raises concerns about Pakistan’s attractiveness as an investment destination. Policymakers must urgently address these issues and work towards creating a favorable environment for foreign investors, ensuring smooth repatriation of their profits and dividends.

As the fiscal year progresses, the outcomes of these measures will be closely monitored by both local and international investors to assess the country’s economic stability and potential for investment growth in the future.

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