Profit, dividend repatriation hits six-year high in FY2024

KARACHI: The repatriation of profits and dividends from foreign investments in Pakistan reached its highest level in six years in the last fiscal year, according to data released by the State Bank of Pakistan on Monday.

This was possible due to stable foreign exchange reserves amid a reduction in the current account deficit, which helped the central bank to clear all the backlogs of unpaid dividends and profits owed to overseas investors.

In the fiscal year 2024, foreign companies’ repatriated earnings increased seven times to $2.2 billion, according to the data. This was the largest repatriation of profits and dividends since FY2018.

The earnings that were repatriated in FY23 amounted to $331 million. June saw a 23-fold surge in profits and dividend outflows to $414.5 million. During his news conference on Monday following the monetary policy meeting, SBP Governor Jameel Ahmad stated that there are currently no claims pending for the repatriation of profits. Banks have settled all outstanding balances owed by foreign companies.

“After recording surpluses for three consecutive months, the current account posted a deficit in May and June, in line with the MPC’s expectation,” said the SBP in its monetary policy statement.

“These deficits were largely due to higher dividend and profit payments and a seasonal increase in imports, which more than offset a significant increase in exports and workers’ remittances,” it said. Cumulatively, the current account deficit in FY24 narrowed significantly to $681 million or 0.2 per cent of the GDP from 1.0 per cent in the preceding year.

“This, along with the revival of financial inflows, helped build the SBP’s FX reserves,” it added. The current account deficit in June widened to $329 million, which is 33 per cent higher than the previous month.

Financial businesses witnessed the largest profit outflow from the country in FY2024, taking $638.6 million, followed by the power sector ($245.8 million) and the communications sector ($205.4 million), according to data from the SBP.

Fitch upgraded Pakistan’s long-term issuer default rating to CCC+, reflecting increased certainty over the continued availability of external funding in the context of the new IMF programme of $7 billion signed this month.

Pakistan requires external debt repayments of $22 billion in FY25, of which $13 billion are regularly rolled over, according to Fitch’s statement. Pakistan has identified $24 billion in gross external financing, mostly from bilateral and multilateral sources including Panda bond issuance, it said.This does not include the renewal of oil facility from Saudi Arabia, Euro/Sukuk bond issuance, FDI and non-resident inflows, and climate finance. These funds will be upside to the overall funding plan, it added.

The SBP projects external repayments of $26.2 billion in FY25, compared with $24.5 billion in FY24. Out of this $26.2 billion, $16.3 billion ($12.3 billion official/bilateral and $4 billion commercial) would be rolled over. The net repayable amount for FY25 is close to $10 billion.In July, the central bank has already paid $1.1 billion, remaining payable amount in 11 months of FY25 is $9 billion.