Profit outflows plunge 88pc in July-February.

KARACHI -- The repatriation of dollars by foreign companies plunged 88 per cent during the first 8 months of the current fiscal year reflecting low profits and stringent restrictions on outflows from the country.

Data released by the State Bank of Pakistan (SBP) on Monday did show that the government policy of curbing dollar outflows severely impacted the foreign direct investment (FDI) which dipped by 40pc during the July-February period of FY23.

The FDI plunged to $788m during 8MFY23 against $1,315m in the same period last year.

The foreign companies remitted $225 million in profits and dividends during 8MFY23 against an outflow of $1,146m in the same period of 8MFY22, a staggering decline of 88.4pc.

Foreign investment falls to $788m

The SBP has been trying to manage the shortfall of foreign currencies - mostly US dollars - through restrictions on opening letters of credit (LCs) to curtail imports significantly, but on the other hand, this has created raw material shortages hampering industrial activities causing massive layoffs, particularly in export-oriented sectors.

The profit outflows in February were just $4.9m against $132.9m in the same month last year, reflecting the poor health of foreign exchange reserves.

Analysts think Pakistan would not be able to attract foreign investments unless it allows investors to repatriate their profits freely.

Given tight control over dollar outflows, the only option is the hundi and hawala system, which is an illegal system that is mostly avoided by...