KARACHI: The outflow of profits and dividends on foreign investments rose by 26 per cent during the first seven months of the current fiscal year, even as foreign direct investment (FDI) declined by 41pc over the same period.

Although the IMF has recently appreciated Pakistan’s economic performance, it did not address the mounting pressure on the external account due to heavy debt servicing and rising interest rates on commercial borrowings.

The State Bank’s latest data shows that profit and dividend outflows on foreign investment during July-January FY26 increased by 26pc to $1.677 billion compared to $1.328bn in the same period of FY25. The increase reflects a relatively relaxed policy by the central bank regarding profit repatriation.

Financial sector observers believe that, following loan agreements with the IMF, the government came under pressure not to hold back profit payments. In FY24, profit outflows were largely restricted.

Foreign investors repatriate $1.68bn during July-January

Of the total outflow during July-January FY26, $1.618bn was repatriated against foreign direct investment, while $60m was paid on portfolio investment. In January alone, profit outflows amounted to $119m.

Sector-wise data show that the highest outflow was recorded in the power sector, which repatriated $397m during the seven-month period.

The financial sector, particularly banks, witnessed strong activity over the past three years, with significant investment from Arab countries. Profit outflows from the financial sector during July-January FY26 stood at $338m, almost double the $164m recorded in the same period last year.

Outflows from the food sector declined to $142m during the first seven months of FY26 compared to $263m in the corresponding period of FY25. The telecommunications sector, however, saw a sharp increase, with profit repatriation rising to $111.3m from $30m a year earlier.

The State Bank’s foreign exchange reserves stand at over $16bn, indicating that the country remains able to meet profit and dividend payments on foreign investments.

However, FDI inflows dropped sharply to $981m during July-January compared to $1.66bn in the same period last year, a decline of 41pc.

Pakistan’s external financing options have also narrowed, as the government has been unable to materialise its plan to raise $250m through Panda bonds.

Moreover, rising regional uncertainty is expected to make commercial borrowing more expensive, though the government may still resort to such borrowing to meet debt servicing needs. The rollover of $12bn in external obligations remains unresolved.

Published in Dawn, February 21st, 2026