KARACHI: The profit outflows slightly decreased in January but were still higher by 90 per cent in the first seven months of FY25, according to State Bank of Pakistan (SBP) data released on Thursday.

Despite the country’s challenges on the external front amid falling foreign exchange reserves, the central bank kept allowing the repatriation of profits on foreign investments. The outflow of profits and dividends surged to $1.317 billion during July-January FY25 from $694m a year ago.

The profit outflow was even steeper in the first half of the current fiscal year as it posted an increase of 114pc over last year.

The dollar outflows were restricted mainly in FY24 to contain the depleting foreign exchange reserves. Foreign investors widely criticised the policy, and the International Monetary Fund (IMF) urged the government to ensure multinational companies get their profits repatriated.

The IMF approved a 37-month $7bn Extended Fund Facility (EFF) for Pakistan in September 2024, which improved the country’s foreign exchange reserves and eventually led to relaxing curbs on the repatriation of profits on foreign investments.

Details showed that the highest amount of $434m was repatriated to the United Kingdom in the 7MFY25 compared to $91m in the same period last year.

Financial experts observed that new investments are not coming except in the equity market, which is too very small.

Despite being the biggest investor in Pakistan, the profit outflow to China was just $94m in 7MFY25. The US investors remitted $166m compared to $43m last year.

Another significant destination for profit outflow was the UAE, which attracted $145m compared to $177.5m last year. Hong Kong received $70m compared to just $1.3m during 7MFY25.

Financial experts said the higher dollar repatriation is a good sign for investors, reflecting a relatively stable economy.

The manufacturing sector top­ped the list, which saw an outflow of $449.2m in 7MFY25 compared to $186m last year, followed by $241.5m from the wholesale and retail sector, $184m energy sector, $164m for finance and insurance and $108m for transportation and storage.

SBP reserves up

The foreign exchange reserves of the SBP increased by $35 million to $11.201bn during the week ended on Feb 14.

The country’s overall forex holdings stood at $15.947bn, including $4.746bn held by the commercial banks.

Published in Dawn, February 21st, 2025