With an improvement in foreign exchange reserves, Pakistan has relaxed restrictions on the outflow of profits and dividends, which have surged by 112% during the first five months of the current fiscal year (FY25).
According to data released by the State Bank of Pakistan (SBP) on Wednesday, profit outflows between July and November FY25 reached $1.129 billion, a significant increase from $532 million during the same period last year.
This policy shift comes as the SBP’s foreign exchange reserves have exceeded $12 billion and are projected to reach $13 billion by the end of FY25. In the previous fiscal year (FY24), the SBP had imposed restrictions on profit repatriation to conserve foreign reserves, a move that drew criticism from the International Monetary Fund (IMF). The IMF had urged Pakistan to ensure the smooth repatriation of profits on foreign investments. The easing of these restrictions began at the start of FY25.
The food sector recorded the highest outflow of $247 million during the first five months of FY25, a sharp rise from $68 million in the same period last year. This growth highlights the sector’s strong performance, despite ongoing boycott campaigns against certain food products and chains.
The financial sector, which achieved record profits last year, repatriated $160 million during the same period, compared to $58 million in the previous year. Similarly, the power sector saw a threefold increase in profit outflows, with $156.6 million sent abroad in the first five months of FY25, up from $53 million during the same period last year.
Other notable outflows included $95 million from the tobacco and cigarette sector.
November Sees Record Outflows
In November alone, profit outflows reached $321 million, representing a staggering 586% increase compared to the same month last year. Financial experts anticipate that December could see even higher outflows, as companies close their books for the calendar year 2024.
Factors Behind the Easing of Restrictions
Experts attribute the relaxation of profit repatriation restrictions to improved foreign exchange inflows, including higher remittances, increased export earnings, and financial support from international institutions such as the IMF, World Bank, and Asian Development Bank (ADB). These factors have strengthened Pakistan’s external position, enabling the SBP to allow greater outflows of profits and dividends.
