Pakistan clears profit transfer backlog for foreign firms

KARACHI: The central bank said on Monday that most of the foreign companies operating in the country have fully repatriated their profits and dividends that were stuck due to a dollar shortage, as the external account situation has improved. SBP 

Jameel Ahmad, governor of the State Bank of Pakistan (SBP), told an analyst briefing after the monetary policy announcement that out of the total 128 companies, 99 have repatriated their profits and dividends, while 29 have made partial repatriation and their requests are in process.

The governor did not disclose the amount of the multinational companies' profits that were stuck in Pakistan, but industry officials said it was over two billion dollars.

Multinational corporations operating in Pakistan have found it increasingly difficult to repatriate their profits because of a shortage of dollars that started last year.

The problem has been exacerbated by the country’s economic woes, including the plunging rupee — which has of late changed direction — and high inflation.

Industry offcials said companies are trying to adapt to the situation by seeking out banks that have access to dollars, investing profits in government securities, and reducing their reliance on imports.

However, the situation has improved recently, as the central bank foreign exchange reserves have increased to over $7 billion from a low of litte over $3 billion earlier this year, thanks to higher remittances and foreign loans.

According to the SBP data, profit and dividend repatriation by foreign investors jumped 448 percent year-on-year to $163.7 million in September, the highest level in more than a year, after the central bank eased capital controls.

Foreign investors repatriated $213 million on account of profit and dividend in July-September of FY24, compared with $58.1 million in the same period of the previous fiscal year (FY22), showing an increase of $155 million.

Analysts said that the recent increase in the profit and dividend outflows is attributed to some relaxation on capital controls that were implemented to manage the foreign exchange situation, following the International Monetary Fund's guidelines.

Mohammad Sohail, an analyst at Topline Securities, said the repatriation of profits shows a positive impact of improving external account situation in Pakistan.