Dollar outflows swell 5 times in two months

KARACHI: Repatria­tion of profits and dividends by multinational companies swelled more than five times in the first two months of the current fiscal year, reflecting the ease of restriction-free dollar outflows amid stability on the external account front.
The State Bank of Pakistan (SBP) reported on Thursday that the profits outflow reached $274.7 million during July-Aug FY25 against $49.2m in the corresponding period last year.
The first half of the previous fiscal year was highly disappointing for foreign investors since the outflow of profits was extremely poor, but the second half witnessed much improvement. At the end of FY24, the total outflows were $2.12 billion against $331m in FY23.
The outflow in August was $135.6m compared to $139.1m in July, while it was $415m in June due to the clearance of many payments at the end of the fiscal year.
The details show that the highest profit outflow of $59.6m was from financial businesses (banks) in 2MFY25 compared to $3.7m in 2MFY24.
The outflows from the tobacco and cigarettes sector were $43.1m, followed by $34.9m from food, $36m from transport and $32m from the power sector. The repatriation of profit from these sectors was zero during the first two months of FY24.
The country-wise details show that the highest amount of $93.2m was remitted to the United Kingdom. China is the largest investor, but the profit outflow to the country was the lowest at $20.5m in 2MFY25. The profits for the UAE were $33.1m, the US $32.5m, and France $30.6m.
The SBP’s restrictions on dollar outflows during FY23 and FY24 drew severe criticism from MNCs, and eventually, the IMF had to intervene, paving the way for higher outflows. The policy badly damaged the country’s image abroad and hurt foreign investment.
SBP reserves rise
The foreign exchange reserve held by the SBP increased by $24m to $9.533bn during the week ended on Sept 20.
The country’s total reserves rose to $14.873bn, including $5.339bn held by the commercial banks.
The SBP reserves provide the country an import cover for 1.6 months.
Published in Dawn, September 27th, 2024