Repatriation of dividends and profits on net foreign direct investment that had tumbled to negligible level in FY23 have finally come back on track. Total repatriation of FDI stood down by 82 percent year-on-year in FY23 – lowest in 15 years and decline in these foreign payments continued their way in early FY24.
The scale of decline witnessed in FY23 surprised many. However, 7 months into FY24, repatriation of dividends and profits on FDI has grown by 3.7 times to $703 million versus $189 million of 7MFY23.
However, media reports of returning investor interest and reviving confidence are not exactly the reason behind the rise in repatriation uptrend. Recall that there was a restriction on outward remittance of profits on foreign investment for over a year when the authorities were trying to control the outflow of dollars from the country. The decline in the repatriation by the multinational companies occurred due to fragile foreign exchange reserve position and the resultant curbs by the central bank on dollar outflow including the restrictions on imports to support balance of payment back. Part of it was also due to the weak and debilitating economic condition of the country as companies’ profitability tumbled and so did the dividend payout. The decline in repatriation was felt across companies from sectors including power, telecom, transport, energy, food and beverages.
The SBP has recently eased the restrictions on repatriation of dividends and profits, and a key driver behind the measure has been the pressure from the IMF. The Fund has reportedly asked the government for complete repatriation as one of the conditions for the financing package.
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