KARACHI: Repatriation of profit and dividends on foreign investments surged almost 21 times year-on-year to $272.5 million in October, indicating the State Bank of Pakistan has relaxed the tighter controls on dollar outflows.

Currency market experts said the outflow of half a billion dollars during the first four months of 2023-24 would surely undermine the efforts of the central bank to keep the foreign exchange reserves at a reasonable level.

The SBP reported on Tuesday that the outflow of profits and dividends in Oct was $272.5m against $163.7m in September, $47m in August and $2.1m in July. The October outflow was a 39-month high as the repatriation of profits was $354m in July 2020.

Data showed the outflow of profits during July-October FY24 was $485.4m against $71m in the same period of the preceding fiscal year, an increase of almost seven times.

During the entire FY23, the outflow of profits was $331m.

Foreign investors remit $485m in 4MFY24

The government and the SBP restricted the outflow since the foreign exchange reserves had plunged to below $3bn in February. The reserves increased after the first tranche of $1.2bn under the IMF’s nine-month $3bn Stand-By Arrangement was released in July. The UAE and Saudi Arabia also helped to build the SBP’s reserves to $8.138bn by the end of July.

After hitting a peak of $8.1bn, the SBP reserves have dipped to $7.1bn.

“It seems that the increased outflow is the result of talks with the IMF since the foreign investors were not satisfied with the way their profits were held in FY23,” said CEO of Tresmark Faisal Mamsa.

He said foreign investors cannot invest without getting profits. This held-up of profits damaged the inflows of Foreign Direct Investment.

Before this crisis of FY23, the outflows of profits and dividends were $1,680.3m in FY22, $1,622m in FY21 and $1,346m in FY20.

The State Bank reported last week a decline of $216m in its reserves during the week ending on Nov 17 and this was due to debt servicing.

The highest amount was repatriated from the food sector as it rose to $68.4m in July-October against zero outflows in the same period last year.

The outflow from the transport sector was $67m against $1.8m, from financial business $54.4m against $5.3m, petroleum refining $55.5m against zero outflows and $50m from the power sector against $18m in the same period last year.

Published in Dawn, November 29th, 2023