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.
According to the latest data released by the State Bank of Pakistan (SBP), the repatriation of profit and dividends plummeted by 82% to $233 million during the first nine months (July-March) of the fiscal year 2022-2023. In comparison, the MNCs were allowed to take out their profits and dividends worth $1.27 billion during the same period last fiscal year.
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The Overseas Investors’ Chamber of Commerce and Industry (OICCI), which represents foreign investors in Pakistan, raised concerns about the issue of profit repatriation with the authorities. OICCI President Amir Paracha stated that all MNCs faced serious foreign exchange remittance issues and emphasized that the government must take investors into confidence. He added that the dividends of foreign investors were shrinking day by day, and the authorities must take immediate measures to protect existing foreign direct investment (FDI) in the country.
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Paracha also expressed concern that the government was not focusing on attracting further investment into the country, and if the situation persisted, Pakistan would fade away from the world’s attention as a country of high investment potential. He highlighted that foreign investors were struggling to sustain operations, and two glaring examples were the pharmaceutical and oil marketing companies, with the government still avoiding a decision on pharma pricing or OMC related cost reimbursement.
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The OICCI has proposed various options to address the declining confidence of foreign investors. These options include the remittance of 10% of pending dividends within the next two months and the rest in quarterly installments over two years, hedging all pending dividends at the current exchange rate and remitting them in the next two years, allowing pending dividends to be invested in a profit-generating bank account to be notified by the SBP, and allowing pending dividends to be reinvested in the expansion of local subsidiaries and treated as additional FDI from the parent company.
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The declining repatriation of profits and dividends from Pakistan is a matter of concern for foreign investors. It is imperative for the government to take immediate steps to address the issue and restore investor confidence in the country’s economy.
