KARACHI: During the first half of the current fiscal year, the outflow of profits and dividends from foreign investments increased by 114%.
In FY24, the main reason for restricting profit repatriation was to keep the nation’s rapidly declining foreign exchange reserves under control. The International Monetary Fund (IMF), among other severe requirements, urged Pakistan to relax restrictions on imports and outward remittances by multinational corporations in order to obtain a fresh 37-month $7 billion Extended Fund Facility. The government stance was highly criticized by foreign investors.
In September 2024, Pakistan obtained the first $1 billion installment of the new bailout plan.
According to data released by the State Bank on Monday, outflows increased from $568 million during the same time previous year to $1.215 billion during July-December FY25. Remittances rose by 33 percent in 1HFY25, despite an IMF infusion for the new fiscal year. It helped the State Bank keep its foreign exchange reserves between $11.5 to $12 billion. Although it is not encouraging, this sum covers imports for two and a half months, which keeps the exchange rate steady.
By the conclusion of FY25, the State Bank wants to increase its reserves to $13 billion.
The unrestricted profit outflows, according to financial analysts, would entice international investors to return to Pakistan. Although the government is making an effort to convince the investors, no noteworthy progress has been made.
Foreign direct investment (FDI) rose from $1.1 billion to $1.3 billion, a 20 percent rise from the same time the previous year. The FDI inflow is still the lowest in the region and has been for a number of years, despite this growth. China continued to be Pakistan’s largest investor for many years, although the United Kingdom, the oldest foreign economic actor, received the largest profit.
Compared to $72 million in the same time of the previous fiscal year, the profits outflow to the UK increased to $423.7 million in 1HFY25.
China received $91 million, up from $39 million over the same time last year, placing it in fourth place. The US received $158.4 million, the UAE received $145 million, and Hong Kong received $68 million.
The first half of FY25 saw $432.8 million repatriated by the manufacturing sector, $239.2 million by the wholesale and retail sector, $168.5 million by the electricity, gas, and other supplies sector, $163.6 million by the finance and business sector, and $91.5 million by the transport and storage sector.
