KARACHI: Due to pressure from the International Monetary Fund, China, and other parties, the State Bank of Pakistan (SBP) had to clear the backlog, resulting in the largest-ever outflow of profits and dividends by foreign investors in the nation since FY18.
From just $331 million in the previous fiscal year to $2.215 billion in FY24, profits and dividend outflows experienced an almost seven-fold surge. This demonstrates unequivocally Pakistan’s stance against permitting dollar outflows. The nation faced a severe shortage of foreign exchange reserves in FY23 and was on the verge of going into default. It was saved by the IMF with a $3 billion Standby Arrangement.
Banking sources, however, said that the SBP progressively reduced the withdrawals until clearing roughly $2.2 billion in FY24. They claimed that profits were still high. The earnings earned by Chinese investors were withheld in the fiscal year that ended at almost $1.8 billion.
According to data from the State Bank, the financial businesses (banks and insurance) had the largest profit of $638.6 million in FY24 as opposed to merely $36.2 million in FY23. In FY24, banks generated enormous profits. In Pakistan’s banking industry, the largest investors are from the Middle East. Their earnings are significantly higher than those of any other sector, as seen by the outflows.
SBP resolves IMF backlog under pressure from China
In FY24, the electricity industry’s profit outflow was $245.8 million, up from $44 million in FY23. Telecommunications ($13.2 million in FY23), transportation ($174 million in FY23), food ($154 million in FY23), and petroleum refining ($131 million in FY23) all saw outflows of similar magnitude.
Foreign direct investment improved by 17 percent to $1.9 billion in FY24 as a result of the ease with which profits could be extracted.
repayment of debt
Following the announcement of the monetary policy, scholars and analysts were briefed by the governor of SBP.
Arif Habib Ltd. projects that the total amount repaid on external debt will be $26.2 billion in FY25, with $22 billion going toward principle and $4 billion toward interest.
Of total, $16 billion is anticipated to be rolled over, including $4 billion in bilateral commercial loans. Ten billion dollars are still owed, of which $1.1 billion was settled this month. Nine billion dollars will still need to be repaid over the next few months.
By the conclusion of FY25, the SBP foreign exchange reserves are predicted to increase from $9.1 billion to $13 billion.
All outstanding profit and dividend payments have been made, according to the SBP governor. “As long as the paperwork is complete, there is no payment outstanding with the banks,” he stated.
The SBP governor stated that Pakistan’s foreign standing has improved with regard to debt sustainability.
“The majority of short-term debt has been serviced and replaced with long-term multilateral financing, including $8 billion in commercial loans. Thus, there is currently no need to be concerned about the sustainability of debt.
