Karachi, December 28, 2023 – In the first five months (July – November) of fiscal year 2023-24, foreign investors have withdrawn $532 million from Pakistan under the category of profit and dividends, according to data released by the State Bank of Pakistan (SBP).
The repatriation of profits and dividends on foreign investment witnessed a notable increase, rising by 312 percent from $129 million during the same period last year.
The month of November alone saw multinational corporations (MNCs) operating in Pakistan and foreign investors in the stock market repatriate profits and dividends totaling $46.8 million. This marked a comparison with the $272.5 million repatriated in the previous month. The profit repatriation on foreign direct investment reached $491 million in July-November FY2024, compared to $103 million in the corresponding period of the previous fiscal year.
Profits and dividends from portfolio investments also contributed to the increased repatriation, amounting to $41 million in the first five months of the current fiscal year, up from $26 million in the same period last year.
Analysts attribute the surge in repatriated incomes to the clearance of MNCs’ backlog of profits and dividends, facilitated after the SBP allowed these businesses to transfer foreign cash to their overseas headquarters.
The positive economic shift in Pakistan’s external sector is underscored by the country securing a short-term $3 billion bailout package from the International Monetary Fund (IMF) in July. The IMF’s lending program not only provided crucial financial support but also enabled Pakistan to obtain funding from multilateral institutions.
As part of the IMF’s stand-by arrangement (SBA), stringent conditions were imposed, leading to historic reforms in the exchange companies’ sector by the SBP. The reforms included a crackdown on the unlawful hoarding, smuggling, and dealing of foreign currency in Pakistan, contributing to the strengthening of the Pakistani Rupee against the US Dollar.
The SBA commitments also played a role in lifting import restrictions, allowing banks to manage their foreign exchange liquidity requirements, especially for settling import letters of credit, through funds sourced from export receipts and remittances.
With the rise in foreign exchange reserves, the SBP granted permission for banks to process requests for dividend and profit repatriation from overseas companies. This policy shift has facilitated the increased repatriation observed in recent months.
Sector-specific data reveals that the petroleum refining sector led in the outflow of profit and dividends, totaling $78 million in July-November FY2024. The food sector followed closely with $68.6 million in repatriations, and the transport industry secured the third position with outflows of $68.4 million.
The overall increase in profit and dividend repatriation aligns with the positive economic indicators seen in Pakistan’s external sector. As the country continues to implement reforms and attract foreign investment, stakeholders are optimistic about the sustained improvement in the economic landscape.
