By Staff Reporter
KARACHI: Pakistan’s foreign investors repatriated a record $1.68 billion in profits and dividends in the first seven months of the fiscal year, even as fresh direct investment into the cash-strapped South Asian economy tumbled by more than 40%.
The outflows jumped 26% from a year earlier to $1.678 billion in the July-to-January period, according to data released by the State Bank of Pakistan. That marks a sharp reversal from fiscal 2024, when the government clamped down on such payments amid a severe foreign-exchange crunch.
The increase comes as Islamabad grapples with mounting external pressures, including hefty debt-servicing costs and elevated interest rates on commercial loans. While the International Monetary Fund has praised Pakistan’s recent economic stabilization efforts, it hasn’t directly tackled these strains on the balance of payments.
Financial analysts attribute the surge to robust corporate earnings driven by stronger industrial activity, coupled with a more permissive stance from the central bank on repatriations. Following fresh loan pacts with the IMF, authorities faced calls to ease restrictions on profit outflows, which had been largely bottled up in the prior year. Nearly all of the repatriations, $1.618 billion, stemmed from returns on foreign direct investment, up 28% from $1.265 billion in the same period last year. Portfolio investment payouts, by contrast, dipped slightly to $60 million from $64.1 million.
Sector breakdowns highlight uneven trends. The power industry led with $397 million in outflows, reflecting ongoing returns from major projects. Banks and other financial institutions followed with $338 million, almost double the $164 million a year ago, buoyed by inflows from Gulf Arab nations over the past three years. Telecom operators saw repatriations more than triple to $111.3 million from $30 million, signaling improved profitability in a sector hit hard by earlier economic turbulence.
Food companies, however, posted a decline to $142 million from $263 million, possibly due to softer demand or operational challenges. In January alone, outflows totaled $118.7 million, almost entirely from FDI returns.The uptick in repatriations underscores a brighter spot for existing foreign players in Pakistan, but it arrives against a backdrop of dwindling new commitments.
FDI inflows slumped 41% to $981 million in the seven-month span, down from $1.66 billion a year prior, as global investors remain wary amid regional geopolitical tensions. Pakistan’s external financing woes have deepened further. Plans to tap China’s bond market with $250 million in Panda notes have yet to materialise, while the rollover of $12 billion in obligations hangs in the balance. With borrowing costs likely to climb amid heightened uncertainty, the government may lean more on commercial debt to cover repayments, adding to the strain.
Still, the State Bank has shored up its buffers, with foreign reserves climbing to $16.2 billion in mid-February. That provides a cushion for meeting profit payouts and other commitments, though analysts warn that sustained outflows could test liquidity if inflows don’t rebound. Looking ahead, repatriations may top $2 billion by fiscal year-end in June if current trends hold, driven by ongoing economic recovery.
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