Foreign firms repatriate $56.6m profits

Despite improved reserves, MNCs continue sending earnings abroad

Salman Siddiqui May 28, 2024


Foreign companies operating in Pakistan have repatriated a notable amount of profit and dividends, totalling $56.6 million, to their headquarters abroad in April 2024. This repatriation continues since the notable improvement in the country’s foreign exchange reserves in recent times.

Although the repatriation fell to a three-month low in April, the Secretary General of the Overseas Investors Chamber of Commerce and Industry (OICCI), M Abdul Aleem, told The Express Tribune, “OICCI members have continued to send the earned profit without any restrictions…The dip may be a seasonal one.”

The dispatches in April, at $56.6 million, are 635% higher compared to the $7.7 million sent in April of the previous year, according to the central bank’s data.

Aleem reported, “The government has cleared all the repatriation of profit and dividend up to the (end of) year 2022.”

The government is clearing the queue of repatriation dues smoothly. It has probably paid all the dues of the foreign airlines first, he added.

To recall, the government had imposed an unannounced ban on foreign companies, restricting them from sending the earned profit out of the country sometime in July 2022 due to a decline in the country’s foreign exchange reserves (held by the State Bank of Pakistan (SBP)).

Despite the ban and other cautionary measures to avoid the nation’s default on foreign debt repayment, the reserves had dropped to critically low levels, below $3 billion, by February 2023.

The reserves (held by SBP) have since risen to a 10-month high of $9.15 billion, providing import cover for only 1.73 months at present.

Multinational companies (MNCs) have dispatched profit and dividends totalling $887.1 million in the first 10 months of the current fiscal year 2023-24, which is 250% higher compared to $253.4 million sent in the same period of the previous year.

Aleem said the foreign investors have expressed their satisfaction over the lifting of the unannounced ban from apparently September 2023, but showed their concern over rupee devaluation, which cut the total dispatches in US dollar denomination.

He said the rupee devaluation (which happened until September 2023) and elevated inflation have remained the top two concerns of the foreign investors. They are still watching and waiting for the return of full-scale stability in the domestic economy. They will make big investments once the projects are marketed by the authorities concerned, he said.

He said Pakistan has high potential for attracting significant foreign investment, considering it is a growing economy with a huge population of over 240 million people.

The recent foreign investment at around $1.5 billion in a year stands equivalent to less than 1% of GDP, while it may easily attract 3% of GDP once the right projects are marketed to them, said Aleem.

Repatriation breakdown

Investors from the United Arab Emirates (UAE) topped the list of profit and dividend dispatches, sending $186.1 million in the first 10 months of FY24, followed by UK investors, who sent $156 million during the period under review.

China ranked third position, sending $101.3 million in the 10 months. US investors dispatched $53.8 million. Other investors from France, Singapore, Switzerland, Ireland, Germany, Japan, Italy, Malaysia, Korea, and the Netherlands have dispatched profits and dividends in double digits, up to $51 million from each country.

Among the sectors of the economy, it was the financial sector which sent the single largest profit and dividends at $149.6 million in the 10 months, followed by petroleum refineries, which sent $132.7 million during the period under review.

The power sector sent $120.9 million, while the food sector sent $109.2 million.

Other sectors that repatriated profits and dividends in double digits over the 10-month period included tobacco and cigarette, chemicals, petrochemicals, mining and quarrying, pharmaceutical and OTC products, electronics, transport, transport equipment (automobile), and communication.

Published in The Express Tribune, May 28th, 2024.

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