State Bank Pakistan (SBP) Governor, Jameel Ahmed, has met with foreign investors to discuss the ongoing exchange rate crisis and dividend and profit repatriation issues, according to a statement issued on Saturday.
The Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors, presented multiple proposals aimed at addressing challenges currently faced by foreign investors in the country.
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These proposals would allow a gradual ease around longstanding issues concerning foreign exchange remittances, especially dividends, while sustaining investor confidence.
The OICCI recommendations for the remittance of pending dividends included a 10% payment over the next two months followed by quarterly dividend payments over time.
Other proposals were investing pending dividends in specific accounts notified by the SBP, bearing profits at least up to discount rates, with both original dividend and accumulated earned profits considered repatriable as and when authorized by the SBP.
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The option to allow companies to use pending dividends to invest in their own or companies’ shares was also discussed by the State Bank.
The repatriation of profit and dividends by multinational companies (MNCs) operating in Pakistan has witnessed a significant decline due to restrictions imposed by the country. The latest data released by the State Bank of Pakistan (SBP) reveals that the repatriation of profit and dividends fell by 82% to $233 million during the first nine months (July-March) of the fiscal year 2022-2023, compared to $1.27 billion during the same period last fiscal year. The government has put restrictions on the outflow of foreign exchange due to falling foreign exchange reserves and massive depreciation in the local currency.
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The SBP governor welcomed the OICCI’s advice to ensure the sustainability of global investors’ interest and investment in Pakistan and committed to supporting recommendations for investing pending dividends with accumulated profits and principals eventually being repatriable.
The present government, which took charge in April 2022, has been facing challenges continuously on the external front. After realizing the situation, the government banned luxury imports in May 2022, which was later withdrawn in August 2022. The SBP also put restrictions on the opening of LCs for import payments and repatriation of foreign currency.
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