Profit repatriation surges 256pc to $830.5m

KARACHI: Repatriation of profits and dividends on foreign investments in Pakistan jumped by 256 percent to $830.5 million in the nine months of the current fiscal year, data from the State Bank of Pakistan showed on Monday.

Multinational corporations (MNCs) operating in Pakistan and foreign investors in the stock market repatriated $71.3 million in profits and dividends to their home countries in March.The profit repatriation on foreign direct investment increased to $768.8 million in July-March FY24 from $194.5 million during the same period of the last fiscal year. During the nine months of the current fiscal year, $61.7 million in profits and dividends from portfolio investments were paid out, compared with $38.6 million in the same period the year earlier.

The central bank allowed international companies to transfer foreign currency to their overseas headquarters due to an increase in foreign exchange reserves and improved external current account, which has resulted in an increase in the repatriation of profits and dividends over the last four-five months.

The current account has turned out better than expected, recording a sizable surplus of $619 million in March 2024, mainly owing to the Eid-related surge in workers’ remittances, the SBP said in its monetary policy statement issued on the same day.The current account deficit narrowed by 87.5 percent to $0.5 billion during July-March FY24, compared with the same period last year. Exports continue to exhibit steady growth – led by rice – while imports have decreased in the wake of better domestic agriculture output and moderate economic activity.

“This reduction in the current account deficit – amidst weak financial inflows – allowed SBP to make sizable debt repayments, including that of a $1 billion Eurobond, while sustaining the SBP’s FX reserves around $8.0 billion,” it said.

The SBP emphasised that a further build-up in FX buffers is essential to enhance the country’s ability to effectively respond to external shocks and support sustainable economic growth.With the IMF tranche of $1.1 billion, reserves will surpass $9 billion in next few days. The SBP is quite hopeful that this reserve level will be maintained by Jun 2024, despite upcoming payments of $1.8 billion, said the SBP’s governor Jameel Ahmad at analyst briefing held following the monetary policy committee meeting.The SBP has repaid commercial loans and now debt profile consists of bilateral and multilaterals, improving the maturity profile of the debt, he added.

The financial businesses produced the biggest profit and dividend outflow, reaching $133.3 million between July and March FY24, according to SBP data. The petroleum refining came in second with $131.9 million in repatriations in the nine months of the current fiscal year. The power sector came in third place with $113.5 million in outflows.