The repatriation of profits and dividends by multinational companies (MNCs) from Pakistan to their headquarters abroad surged by 3.4 times, reaching $759.2 million in the first eight months of the current fiscal year 2023-24, thanks to improved foreign currency supplies in the domestic economy.
The sectors leading in profit and dividend dispatches included petroleum refineries, power, and financial businesses in the eight-month period. According to State Bank of Pakistan (SBP) data, repatriation had dropped to $225.4 million in the same period of the previous fiscal year 2022-23, following a decline in foreign exchange reserves to critically low levels.
In February 2024 alone, profit and dividend dispatches amounted to $65 million, marking a 13-fold increase compared to the $5 million sent in the same month the previous year. However, dispatches slowed down compared to the previous month of January 2024, which saw $126.6 million being sent.
Despite the increase, February’s repatriation remained lower than the normal monthly average range of $100-150 million, reflecting the impact of the central bank’s unannounced ban on dispatches in July 2022, which was lifted in August 2023.
Speaking to The Express Tribune, Tahir Abbas, Head of Research at Arif Habib Limited, attributed the resumption of profit and dividend dispatches to the improvement in the country’s foreign exchange reserves. He noted that reserves had recovered to above $8 billion by March 15, 2024, from below $4 billion in June 2023.
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During the period of low reserves, there was a heightened risk of default on repayment of maturing foreign debt, prompting authorities to temporarily slow down dispatches. Abbas highlighted that foreign companies were not only sending profits and dividends earned in the December 2023-end quarter but also clearing backlogs from the previous period.
The inability to dispatch funds between July 2022 and July 2023 was due to the foreign exchange reserves crisis during that time, as noted by Abbas.
According to an official of the Overseas Chambers of Commerce and Industry, foreign companies typically repatriated funds ranging from $1.5 billion to $2 billion annually. Abbas attributed the recent increase in repatriation to higher export earnings, improved inflows of workers’ remittances, and the disbursement of the International Monetary Fund (IMF)’s $3 billion loan programme, which began in late June 2023.
Abbas estimated that full-year repatriation in FY24 could reach $1 billion, anticipating further increases with the receipt of the third and final tranche of the IMF loan and the government’s intention to secure a larger and longer loan programme after the current one ends in April 2024.
Published in The Express Tribune, March 28th, 2024.
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