Dollar outflow plunges

KARACHI: The repatriation of profits and dividends on foreign investments plunged to just $46.8 million in November against the first four months’ average of $120m, reflecting restriction on dollar outflows amid falling foreign exchange reserves.

The data issued by the State Bank of Pakistan on Wednesday showed the multinationals remitted $532.2m to their respective destinations abroad during the July-November period of 2023-24.

Bankers believe that the dollar outflow was higher during the talks with the IMF team for the release of the second tranche of $700m under the nine-month $3bn Stand-By Arrangement.

“The government is trying to manage the inflow and outflow of dollars to keep the current account deficit at the minimum level till the end of FY24,” said a banker.

However, others believe that the restrictions on profit outflow would be counterproductive since the government has a greater plan to attract up to $100bn under the Special Investment Facilitation Council (SIFC).

The data showed that only the petroleum sector was lucky to send the highest profit of $22.6m in November while the cumulative outflows were $78.2m during July-November FY24.

The second highest outflow was from the food sector during the first five months of the current fiscal year, but it witnessed the biggest hit as the sector could send out just $1.2m in November.

The transport sector remitted $68.4m profit in 5MFY24 including $1.2m in November showing the restriction on the outflows.

Repatriation of dollars from the financial business and power sectors was $58.1m and $52.9m in 5MFY24 including $3.8m and $2.6m in November, respectively.

Bankers said that they had been forced by the SBP to tightly control a balance between inflows and outflows, which drastically reduced the imports since banks didn’t open letters of credit. The exporters, however, were facilitated against their export proceeds to open LCs for imports.

Published in Dawn, December 28th, 2023