KARACHI: The outflow of profits on foreign investments in Pakistan doubled by the end of the third quarter of the current fiscal year, reflecting a more relaxed stance by the State Bank of Pakistan (SBP).
The latest data released by the SBP on Friday shows that profits and dividend outflows from the country in the first nine months of the current fiscal year reached $1,720 million, compared to $826m in the same period of the last fiscal year.
Profit outflows have long remained a point of contention for foreign investors. Reportedly, the IMF intervened on this issue, advocating for higher repatriation of profits. Since Pakistan is currently under an IMF programme and aims to maintain this crucial support, the suggestions regarding profit outflows were accepted by the authorities.
Despite foreign exchange reserves being at an eight-month low, the SBB remains optimistic about raising total forex reserves to $14 billion, exceeding the initial target of $13bn.
Highest profits of $511m repatriated to UK
This optimism is primarily driven by unexpectedly high remittances, with the SBP aiming for $38bn in remittances by the end of FY25.
The data shows that during the first nine months of FY25, payments on Foreign Direct Investment (FDI) amounted to $1,649m, compared to $764.3m in the same period of FY24. Similarly, payments on foreign portfolio investments stood at $71m, slightly up from $62m in FY24.
A notable shift was seen in profits outflow to China, which surged to $221.4m during this period, compared to $79.7m in the same period of the previous fiscal year. While China has long been Pakistan’s largest foreign investor, profit outflows had historically remained modest.
The United Kingdom recorded the highest profits outflow in the nine-month period, receiving $511.2m, a significant jump from $154m last year. The UK is also Pakistan’s oldest foreign investor.
Profit outflows to the United States rose nearly fourfold to $190m, compared to $48m in the same period of the previous fiscal year.
While the United Arab Emirates (UAE) had once been Pakistan’s largest trade partner, it was overtaken by China in recent years due to increased exports from China to Pakistan.
Interestingly, the UAE was the only major country to record a decline in profit outflows during the nine-month period, with $146m repatriated compared to $178m in the same period last year.
Published in Dawn, April 19th, 2025
