Profit repatriation from foreign investment plunges 87 percent in July

Our Correspondent
Tuesday, Aug 29, 2023

KARACHI: Repatriation of profits and dividends on foreign investment in Pakistan fell sharply by 87.27 percent year-on-year to $2.1 million in the first month of the current fiscal year, according to central bank data released on Monday.

Profit repatriation from foreign direct investment was $1.5 million, while the outflow of dividends and profit from portfolio investments was $0.6 million.

Data from the State Bank of Pakistan (SBP) showed that the oil and gas exploration sector saw the most profit repatriation by foreign companies operating in Pakistan. Multinationals in this industry repatriated $0.6 million to their overseas headquarters.

Electronics companies repatriated $0.4 million in profits, while power companies repatriated $0.3 million in dividends and profits to their overseas offices.

The decline in profit repatriation by foreign investors is due to capital controls imposed by the country to address its dollar shortage. Pakistan's foreign exchange reserves are depletingrapidly, despite the International Monetary Fund's (IMF) $3 billion bailout package.

Analysts expect that profit repatriation will pick up as the central bank eases import restrictions and capital controls, which has led to a backlog of profits and dividends from overseas investors.

The import restrictions, which were imposed to address the current account deficit, have had a negative impact on businesses in Pakistan, which is already in a state of economic distress.

High interest rates and a deliberate policy of demand destruction to control inflation have led to the closure of many manufacturing plants and increased unemployment. These factors have significantly hurt the profits of both local and foreign businesses. As a result, MNCs are sending less money abroad from Pakistan.