By Staff Reporter
KARACHI: Foreign companies took less money out of Pakistan in the first two months of the fiscal year, a lagging signal of how thinly the country attracted investment during a Gulf war that is still unfolding.
Repatriation of profits and dividends fell 13.4% to $557.6 million in July and August from $643.7 million a year earlier, according to State Bank of Pakistan data published Friday. Outflows rose 13.3% from July to $296.2 million in August, though that was still 15.1% below the same month last year.
The drop comes as the central bank’s foreign-exchange reserves climbed to a record $21.4 billion as of Sept. 11, helped by roughly $3 billion raised through Pakistan’s Eurobond sale. The build-up lifted import cover to more than three months, giving the country a bigger external buffer and removing any obvious obstacle to companies sending earnings home.
Analysts see the decline as narrow rather than a sign that investors are holding back. Power and financial businesses together accounted for a fall of about $115 million from a year earlier, more than the entire headline shortfall, according to Saad Hanif, head of research at Ismail Iqbal Securities. That points to the timing of payouts by independent power producers and banks rather than any constraint on access to foreign currency, he said.
“Excluding these two sectors, repatriation would actually be higher year-on-year, driven by telecom, beverages, tobacco, chemicals and transport,” Hanif said.
Weak Investment Base
Still, the figures fit with a longer stretch of weak foreign investment. Pakistan recorded a 34% drop in foreign direct investment in the fiscal year through June, to $1.64 billion from $2.48 billion the year before. Successive governments have struggled to draw overseas capital, and the past year brought another setback: intense fighting in the Gulf during most of the second half kept Pakistan, a neighbor of the region, off the radar of many foreign investors.
Profit outflows had risen 3.87% to $2.3 billion in the 2026 fiscal year, even as new investment fell.
The outlook for fresh inflows remains clouded. The Middle East war is continuing and the situation is worsening as oil supply shortages tighten international markets, with regional forces such as the Houthis entering the conflict. That will remain a difficult challenge for the government as it tries to attract foreign direct investment, according to the report.
Country Breakdown
China, the biggest source of foreign investment into Pakistan’s infrastructure, received the largest share of repatriated earnings, at $161.2 million in July-August, down from $205.6 million a year earlier.
Flows to the Netherlands rose to $107 million from $86.7 million. Payments to the U.K. fell to $103 million from $147.5 million. The sharpest decline, of more than 50%, was to the United Arab Emirates, where outflows dropped to $19.2 million from $45 million.
External Position
Pakistan’s external accounts have also improved. The current-account deficit narrowed 70% from a year earlier to $98 million in August, largely on strong remittances from overseas workers. For July-August, the gap shrank 36% to $543 million.
The central bank expects resilient remittances and higher exports of information and communications technology services to hold the current-account deficit within zero to 1% of gross domestic product in the fiscal year through June 2027. It also said planned financial inflows and its continued purchases of foreign currency should be enough to meet external financing needs and support reserves.
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