Saturday December 02, 2023

Profit repatriation plunges 82.69pc in July-April

By Our Correspondent
May 27, 2023

KARACHI: Repatriation of profits and dividends on foreign investment in Pakistan fell 82.6 percent to $253.4 million in 10 months of the current fiscal year, central bank data showed on Friday.

The decline was attributed to capital controls imposed by the country to manage its dollar shortage. Pakistan's foreign exchange reserves have been rapidly depleting due to a stalled lending programme from the International Monetary Fund (IMF) and the country is at risk of default. The forex reserves held by the central bank have stood at $4.2 billion—barely enough to cover a month’s imports.

In April, multinational companies doing business in Pakistan and foreign investors in the stock market repatriated $20.2 million in profits and dividends to their home countries. This amount is higher when compared to the $7.7 million that was transferred in the same month last year.

The profit repatriation on foreign direct investment decreased from $1.333 billion in the same period of the last fiscal year to $207.9 million in July-April FY2023, according to data from the State Bank of Pakistan (SBP).

The outflows of profits and dividends on portfolio investment decreased to $45.4 million from $130.7 million in the July-April FY2022-period. Pakistan's economy is in serious trouble. Import restrictions that were implemented to manage the current account deficit have had a negative impact on the country’s businesses. Numerous manufacturing units have been closed, and unemployment has increased as a result of high interest rates and a deliberate policy of demand destruction intended to control inflation, which is at its highest level in 50 years. These elements have had a significant negative impact on businesses’ profits. Therefore, they are repatriating less money abroad.

The capital limitations are expected to have detrimental effects on foreign investment in Pakistan and discourage both current and potential international investors. Pakistan already relies heavily on debt to cover its external financing needs due to the country's low level of foreign investment. Analysts contend that attracting foreign investment is essential for Pakistan to keep a positive external current account.

According to SBP data, foreign companies from Hong Kong operating in Pakistan repatriated $84.4 million to their home offices between July and April of FY2023, down from $89 million in the same period last year. Chinese companies returned $50.1 million to their home country during the first ten months of this fiscal year, down from $107.3 million a year earlier.