KARACHI: The outflow of profits on foreign investments jumped by 85 per cent in the first quarter of the current fiscal year while the figure for September alone was more than 55pc.
The State Bank’s report shows the government has decided to ease restrictions on the outflow of profits on foreign investments in order to attract investors.
According to the SBP, repatriation of profits reached $395 million during the July-Sept 2024 quarter (FY25), compared to $213m in the same period of the previous fiscal year (FY24). This means the profits sent abroad during the first quarter of FY25 exceeded those of FY24 by $182m — a jump of 85pc.
The SBP reported that the total outflow of profits in September were $118.7m — 55.7pc of the total for the quarter of $395m.
Experts attribute easing of curbs on repatriation of returns to State Bank’s improving foreign current account
Financial experts believe the improved foreign current account of the State Bank, which shows reserves of more than $11 billion, could be the major factor behind the lifting of curbs on repatriation of profits.
The State Bank had kept a tight lid on outflows during FY23 and FY24. It eased the policy only during the last quarter of FY24 (April-June 2024).
However, a jump in the September profit outflows reflects the confidence of the government as well as its expectations about foreign investments.
Encouraging factors
According to experts, a negligible current account deficit of $98m in the first quarter and a current account surplus in August and September is encouraging enough for the government and the central bank to allow profit outflows. If the current account surplus trend persists for another two or three months, the CA could also be in surplus.
This will give a boost to the sentiment of foreign investors and stabilise the exchange rate.
The biggest amount sent abroad during July-Sept 2024 went to the United Kingdom. Out of the total outflow, $145.5m was repatriated to that country. The figure for the last fiscal was a paltry $15.6m.
The United States, the United Arab Emirates and France were the three other major destinations.
The data on sector-wise outflows show the highest profits were sent from the financial business sector (banking). The sector received $88.2m during the first quarter. Tobacco and cigarettes got $68m, power sector $39m, food $42m and transport $47.4m.
The government set up the Special Investment Facilitation Council (SIFC) in June last year to attract foreign investment, but investors are still hesitant to bring their money to Pakistan due to political uncertainty.
Published in Dawn, October 30th, 2024
