Foreign company repatriation of dollars fell 80 percent during the first eight months of the current fiscal year, mirroring low profits and strictly enforced restrictions on outflows from the country.
According to data released by the State Bank of Pakistan (SBP), the government’s policy of limiting dollar outflows had a significant impact on foreign direct investment (FDI), which fell by 40 percent during the July-February period of FY23.
Foreign companies remitted $225 million in profits and dividends during 8MFY23, compared to an outflow of $1,146 million during the same period in 8MFY22, a substantial 80 percent decrease.
FDI fell to $784 million in 8MFY23, compared to $1,315 million in the same period last year.
Profit outflows in February were only $4.9 million, compared to $132.9 million in the same month last year. SBP has been attempting to manage the shortfall of foreign currencies by restricting the opening of letters of credit (LCs) to significantly reduce imports, but this has resulted in raw material shortages impeding industrial activities, particularly in export-oriented sectors.
Moreover, profit payments on FDI during 8MFY23 were $188 million compared to $1,037.8 million the previous year. Conversely, profit outflows from foreign portfolio investment (FPI) were $35.9 million in 8MFY23, compared to 108.6 million the previous year.
Mining and quarrying had the highest outflow, totaling $124.9 million in 8MFY23, compared to $114.8 million in the same period last year.
Profit outflows from the manufacturing sector fell from $374 million in the same period last year to $27.9 million in 2022-23.
The outflow from the financial and insurance sector, which is still profitable despite the bad economy, fell to $18 million this year, down from $181 million in 8MFY22.
Outflows from the electricity, petrol, and air-conditioning sectors totaled $32.9 million in 8MFY23, compared to $126.3 million in the same period the previous year.
Meanwhile, profit outflows from the information and communication sector fell to $6.6 million from $69 million the previous year.
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