MNCs Transfer $139 Million Abroad in July
MNCs Repatriate $139 Million in July, Marking a 66% Drop from June
KARACHI:
Multinational companies (MNCs) operating in Pakistan repatriated a total of $139 million in profits and dividends to their headquarters abroad in July 2024. This figure marks a significant decrease of 66.5% compared to June 2023, when repatriations soared to $414.5 million. This drop in outflows follows an unusually high level of repatriation due to the clearance of a backlog from the previous fiscal year.
According to data released by the State Bank of Pakistan (SBP) on Wednesday, July’s repatriation of profits and dividends represents a substantial increase of 64.5 times from the mere $2.2 million remitted abroad in July 2023. This earlier low level was largely attributed to Pakistan’s strained foreign exchange reserves at that time.
Despite the increase from last year, the July 2024 outflows still signify a return to more typical levels following the previous year’s exceptional figures. This slowdown in repatriation aligns with the normalization of foreign currency outflows and reflects an easing of pressure on Pakistan’s financial system.
In the currency markets, the Pakistani rupee experienced a slight depreciation, falling by Rs0.13 to Rs278.45 against the US dollar in the inter-bank market. This decline partially reversed the gains achieved over the previous three days, during which the rupee had appreciated slightly.
The depreciation of the rupee comes amid ongoing concerns over Pakistan’s foreign debt and loan rollover negotiations. The country has yet to secure guarantees for the rollover of $9 billion in loans from bilateral creditors and friendly nations. These loans are due for repayment in the ongoing fiscal year, and their rollover is crucial for the final approval of a $7 billion loan program from the International Monetary Fund (IMF). Pakistan had earlier reached a staff-level agreement with the IMF in mid-July, but the approval of the IMF’s Extended Fund Facility (EFF) has been delayed until September.
The delay in the IMF approval and loan rollover could further pressure the rupee, adding to the economic uncertainties facing the country. Earlier this month, Pakistan’s rupee touched a five-week high of Rs278.32 to the dollar, but has since settled within a narrow range of Rs278-278.74/$ over the past five months.
In the open market, the Exchange Companies Association of Pakistan reported that the local currency has remained stable at Rs280/$ for seven consecutive working days. This stability in the open market contrasts with the fluctuations seen in the inter-bank market.
The high levels of profit repatriation by MNCs reflect the continued outflow of capital from Pakistan, driven by the need for foreign firms to transfer earnings back to their home countries. This pattern of repatriation is indicative of the broader economic challenges faced by Pakistan, including issues related to foreign currency management, economic stability, and investor confidence.
Foreign firms across various sectors, including power, transport, chemicals, and banking, have been actively repatriating profits, contributing to the total amount of $139 million sent abroad in July. Each sector has contributed between $13.5 million and $29.5 million to the overall repatriation figure.
As Pakistan navigates these economic challenges, the impact on the currency and the broader financial landscape will continue to be closely monitored. The resolution of loan rollover issues and progress on securing IMF support will be critical factors in shaping the future stability of Pakistan’s economy and its currency.