KARACHI: Repatriation of profits and dividends during the first eight months of the current fiscal year jumped by 237 per cent, reaching close to the inflow of foreign investment in the same period.

The State Bank of Pakistan’s (SBP) latest data shows that the central bank eased the outflow of profits and dividends on foreign investments. The poor outflow of profits in FY23 was widely criticised by investors, while independent economists termed the policy as an anti-investment strategy. However, despite the easing of profit outflow, the inflow of foreign investment further declined by 17pc during July-Feb FY24 compared to the same period of the last fiscal year.

It is believed that the International Monetary Fund (IMF) was also critical about the SBP’s policy of having tight control over the outflow of profits and dividends on foreign investments. Both the present and previous governments have been trying their best to meet all the conditions and directions issued by the IMF regarding the recovery of the economy.

Repatriation nearly matches FDI inflows in 8MFY24

According to SBP data, the total outflow of profits during the eight months of FY24 was $759.2 million compared to $225m in the same period of the last fiscal year; an increase of $534.2m or 237.4pc.

However, the outflow of profits and dividends was slightly lower than the FDI inflow of $820m during the same period. The outflow was just $61m less than the inflows of FDI, which means the inflows could not help the country improve its dollar requirement. The SBP arranged dollars to keep the reserves at $8 billion; however, this is not enough to bear the burden of the trade deficit and debt servicing. In April, $1bn is required to pay against the maturity of the Euro bonds. At the same time, the country is expected to receive $1.1bn from the IMF, which means the reserves of the SBP would not see any significant change.

The sector-wise data shows that the higher profits outflow of $206m was for the manufacturing sector, which was just $28m in the same period of the last year.

Only four sectors noted big volumes of profit outflows, including manufacturing, wholesale and trade ($197.3m), electricity and gas ($110m), and finance and insurance ($105m).

According to the data, the outflow of profits and dividends in February was $64.9m compared to just $4.9m in the same month of the last year. This included $64.5m as profits on FDI and an amount of $0.4m as return on foreign portfolio investment (FPI).

Despite massive fluctuations in the equity market, foreign investors succeeded in taking out $55.5m in profits on account of FPI during July-Feb of FY24; an increase of $37m from the same period of the last year.

Pakistan has been a neglected country by foreign investors, and FDI is declining each year. The biggest investors remained China for many years, but the inflows drastically reduced during FY24.

Published in Dawn, March 28th, 2024

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Kindness needed
Updated 20 Jun, 2024

Kindness needed

This year’s World Refugee Day theme — solidarity with refugees — includes keeping our borders accessible and addressing the hurdles they face.
Fitch’s budget note
20 Jun, 2024

Fitch’s budget note

PAKISTAN’S ongoing economic crisis is multifaceted. At one end, the government must pursue stabilisation policies...
Cruelty to animals
20 Jun, 2024

Cruelty to animals

TWO recent incidents illustrate the immense cruelty many in this country subject voiceless animals to. In the first...
Price bombs
Updated 18 Jun, 2024

Price bombs

It just wants to take the easy route and enjoy the ride for however long it is in power.
Palestine’s plight
Updated 17 Jun, 2024

Palestine’s plight

While the faithful across the world are celebrating with their families, thousands of Palestinian children have either been orphaned, or themselves been killed by the Israeli aggressors.
Profiting off denied visas
Updated 19 Jun, 2024

Profiting off denied visas

The staggering rejection rates underscore systemic biases in the largely non-transparent visa approval process.