The relaxation of capital controls has driven a significant increase in profit outflows by foreign investors, surging by 74.46 percent during the initial two months (July and August) of the fiscal year 2023-24.
According to data released by the State Bank of Pakistan (SBP), foreign investors sent a total of $49.2 million in profits and dividends to their home countries during July and August in the current fiscal year, compared to $28.2 million during the same period in the previous fiscal year, marking an increase of $21 million.
Specifically, profit repatriation from foreign direct investments (FDIs) saw a significant rise, reaching $43.9 million during July and August of FY2023-24, up from $26.6 million during the same period the previous year. Additionally, the outflows of profits and dividends from portfolio investments also increased, reaching $5.3 million from $1.6 million.
On a month-to-month basis, foreign investors sent $47.1 million during August, indicating a growing interest in repatriating returns on their investments to their home countries.
This notable uptick in outflows is attributed by experts to the relaxation of capital controls that had been implemented earlier to curb the outpouring of foreign exchange from the country.
Mining sector contributed to the rise in repatriation, sending abroad $13.9 million compared to $7.9 million during the same period in the prior year. Financial businesses also saw an increase in outflows, sending $3.7 million abroad, up from $0.3 million in the previous year.
One sector that stood out in terms of outflows was the petroleum refining sector, which repatriated $27.4 million during July and August of FY2023-24. Interestingly, this sector had not repatriated any funds during the same period in the previous fiscal year.