KARACHI: The profits and dividends on foreign investment have increased by almost six times during the first 11 months of the current fiscal year over the same period of the last fiscal.

The profits and dividends were deliberately restricted by the State Bank (SBP) in FY23 to save its reserves at a time when the country had reached close to sovereign default at the end of June last year.

Data issued by the State Bank on Thursday shows profits and dividends rose to $1.805 billion during July-May FY24 while it was just $313 million in the same period of the last fiscal year — almost six times higher.

The State Bank eased the outflow of profits on foreign investments upon the IMF’s intervention and asked the central bank to release the profits held back by it.

This is also visible from the outflow of profits which jumped to $918 million last month alone, reflecting the pressure on the SBP.

Before the IMF’s intervention, economists and analysts had been bitterly criticising the State Bank for holding the profits on foreign investments. It was highly discouraging for foreign investors to bring more money into a country where profits are held back officially.

Some analysts believe the SBP has yet not released the entire profits and dividends earned by foreign investors during FY23 and FY24.

FDI growth

Foreign direct investment witnessed a growth of 15 per cent during July-May FY24, but total inflows were less than the outflow of profits during the same period.

The State Bank’s data shows that the FDI was $1.728bn during the first 11 months while profit outflows amounted to $1.8bn. It shows that the State Bank has also released profits from the previous fiscal year FY23.

The State Bank’s reserves fell by $239m to $8.895bn during the week ending on June 21. According to the State Bank, the reserves declined due to external debt repayments.

Published in Dawn, June 28th, 2024