KARACHI: The repatriation of profits and dividends on foreign investments surged year-on-year by 251 per cent during the first 10 months of the current fiscal year, reflecting the State Bank of Pakistan’s relaxed policy towards dollar outflows.

According to data released by the central bank on Monday, the country witnessed a profit outflow of $887 million during July-April FY24 compared to $253m in 10MFY23.

The SBP has eased control over outward remittances. Sources in the financial sector said foreign investors were apprehensive about the situation and had been complaining about the policy. At the same time, the IMF also intervened, as it did in relaxing curbs on imports.

The country has been the lowest receiver of foreign investment in the region, and the policy to stop the outflow of profits has shattered the confidence of foreign investors. Foreign investment during the first 10 months of the current fiscal year was limited to $1.45bn.

Further details showed that the outflow in April was just $56m against the monthly average of $88m, indicating that the State Bank was still trying to hold dollars until the end of the fiscal year by June 30. The IMF requires the State Bank to maintain $9bn in foreign exchange reserves at the end of FY24.

Moreover, the profit outflow on foreign direct investment was $811m this year. However, the country witnessed a repatriation of $75m compared to $45m in the same period last year.

The profit outflow was the highest in the manufacturing sector, a wide difference from the previous year. The SBP data showed that the profits and dividends outflow for manufacturing was $226.9m during the 10 months of FY24, compared to $30.4 m during the same period last year. Sources in the financial sector said the suck-up in profits and dividends was still in the billions of dollars, but the SBP or the government does not provide details about them.

The wholesale and retail trade noted a surge in outflows, reaching $213.5m during 10MFY24 from just $4.8m last year, showing the strict policy in FY23. This year’s outflows show a lenient policy due to over $9bn reserves and the IMF’s possible interference in this affair.

The situation is almost the same for finance and insurance as for wholesale and manufacturing. The profits outflow from finance and insurance during July-April FY24 rose to $150m compared to $21.7m in the same period last year.

Similarly, the outflow from electricity and gas was $122m during these 10 months, compared to $37 m in the same period last year. The profit outflow from transport and storage was $78m, compared to just $7.8m last fiscal year.

Published in Dawn, May 28th, 2024