Profit repatriation remains steady at $2.2 billion in FY25 despite improved economic conditions

KARACHI: Foreign companies operating in Pakistan repatriated a total of $2.220 billion in profits and dividends during fiscal year 2025 (FY25), a slight increase from $2.215 billion in FY24, according to the State Bank of Pakistan (SBP). 

Despite improved external accounts and a more stable macroeconomic environment, the repatriation of profits remained tightly controlled.

The data shows that most of the repatriated funds, around 91%, came from Foreign Direct Investment (FDI), which amounted to $2.105 billion in FY25, up by $20 million from the previous year. This restrained outflow came as a surprise to many in the financial sector, especially given the record remittances of $38.3 billion, a current account surplus, and a stable exchange rate during FY25, supported by the International Monetary Fund (IMF).

In contrast, FY23 had witnessed a decline in profit outflows due to a severe economic crisis, dwindling reserves, and foreign exchange restrictions. During that period, profit repatriation on FDI dropped to $1.349 billion, a $331 million decrease from FY22.

Despite economic improvements in FY25, Pakistan continued to face challenges in meeting export targets and attracting foreign investment. FDI increased by only 4.7% year-on-year to $2.457 billion, suggesting lingering investor caution.

Sector-wise, the power sector recorded the highest profit outflows, with $399 million repatriated in FY25, up from $246 million the previous year. This sector has been criticised for its capacity payment model, and the government has engaged in negotiations to address these inefficiencies. 

The financial sector saw a notable decrease in repatriations, with $383 million in FY25, almost half of the $638.6 million in FY24, as banks’ profits from high-yielding government securities decreased.

The food sector experienced a sharp rise, with profit outflows doubling to $306 million in FY25 from $154 million in FY24. Additionally, the oil and gas exploration sector saw the most significant turnaround, with profit repatriation increasing to $146.4 million in FY25 from just $13 million in the previous year.

Despite the positive economic indicators, the overall cautious approach to profit repatriation suggests that foreign investors remain hesitant, reflecting the broader challenges in the investment climate.