KARACHI: Multinational companies operating in Pakistan haven’t been able to repatriate their dividends in recent quarters because of the curbs on dollar outflows.

Speaking to Dawn on Monday, Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M. Abdul Aleem said the repatriation of profits in the form of dividends to the overseas headquarters of foreign companies has been on hold since the beginning of 2022-23.

“All multinationals irrespective of their size and sector are at the receiving end of this problem. Going by an earlier survey of OICCI members, the problem didn’t exist before April 2022,” he said.

The widespread dollar shortage has led banks to refuse opening the letters of credit for even food and energy imports. Foreign exchange reserves of the country are at a multi-year low, forcing the government to stop large dollar outflows, including those by overseas investors.

As for the quantum of pending dividends, Mr Aleem said OICCI members don’t regularly share with their representative body the exact number of outstanding payments.

The CEO of an investment bank, which serves large foreign clients, told Dawn on the condition of anonymity that the pending dollar dividends amount to more than $1 billion. These outstanding payments are in banking, food, telecom, chemical, power, tobacco, auto and energy exploration sectors.

Pakistan has a liberal foreign investment policy that allows 100 per cent profit repatriation. Multinational companies repatriated $1.6bn to their overseas headquarters in calendar year 2021. The repatriated amount dropped to $889 million in the first 11 months of 2022, according to data compiled by Optimus Capital Management. The SBP has yet to release the repatriation number for December.

In an interview last week, the CEO of British International Investment (BII) told Dawn the UK’s premier development finance institution started facing delays in transferring dollar-based dividends in the second half of 2022.

Commenting on the situation, Pakistan Business Council (PBC) CEO Ehsan Malik said some multinational companies that are members of the pan-industry advocacy group stopped declaring dividends to reduce the pressure on dollar outflows.

Being large entities, these multinationals as well as their parent companies have “stamina and perseverance” to endure such pressure, he said. “Many (of them) have been here since 1947 and have learned to cope with the volatility, uncertainty, complexity and ambiguity of Pakistan,” Mr Malik said.

Between importing raw materials and remitting profits, the PBC chief said his member firms will “prioritise the former” given that business continuity is significantly more important for them.

A group representing international investors held a meeting with the SBP governor at the end of last month to resolve, among other issues, the matter of pending dividends.

They requested the central bank governor to let them repatriate “smaller dividends of last quarter”. They also asked the SBP to lock in the dollar value of dividends pending their remittance — a move aimed at saving the receiver from the exchange rate loss.

The overseas investors demanded a “partial remittance of dividends” until the situation gets better as a full dividend remittance is “beyond the capacity of the SBP currently,” said Mr Aleem.

Published in Dawn, January 24th, 2023

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