Karachi, February 21, 2025 – Foreign banks operating in Pakistan have repatriated a significant sum of $165 million in profits and dividends during the first seven months (July–January) of the fiscal year 2024-25, according to a recent report from the State Bank of Pakistan (SBP). This marks a striking 98% increase from the $83.4 million withdrawn during the same period in the previous fiscal year, reflecting a surge in profits for these financial institutions.
The dramatic rise in repatriation highlights the ongoing benefits foreign banks enjoy under Pakistan’s liberal policies, which allow them unrestricted remittances of their earnings. Over the past two years, these institutions have seen considerable profits, mainly due to Pakistan’s high interest rates. Additionally, the government’s reliance on the banking sector for budget financing has further provided these banks with lucrative investment opportunities, enabling them to significantly boost their earnings.
SBP data indicates that foreign banks sent $134 million in profits and dividends related to Foreign Direct Investment (FDI) back to their home countries during the first seven months of the current fiscal year. This marks a remarkable 109% increase compared to the $64.2 million in the same period of the previous fiscal year. Meanwhile, the stock market also experienced capital outflows, with foreign banks repatriating $30.5 million from equity investments between July and January. This was a rise from $19.2 million in the previous fiscal year.
Experts in the financial sector suggest that the increase in profit and dividend repatriations is a sign of improving economic conditions in Pakistan. The stabilization of exchange rates and the rise in foreign exchange reserves have bolstered the confidence of the government, which has eased restrictions on foreign currency movements. As a result, foreign banks have been able to transfer their earnings abroad with fewer liquidity concerns, allowing them to capitalize on their profits.
While the repatriation of profits is a standard practice for foreign investors, the substantial increase in outflows points to the growing profitability of the banking sector in Pakistan, even amid various economic challenges. These banks continue to benefit from high interest rates, which have proved advantageous for their bottom lines. However, some experts are cautious about the long-term implications of such large capital outflows, especially in terms of pressure on the country’s external accounts.
While Pakistan has worked hard to maintain an investor-friendly environment, some analysts caution that excessive capital repatriation could drain the country’s financial resources, potentially impeding economic growth and stability. Policymakers may face the challenge of striking a delicate balance between attracting foreign investment and ensuring that sufficient capital remains within the domestic financial system to support sustainable growth.
The surge in capital outflows from foreign banks underscores the importance of continued reforms aimed at fostering both domestic and foreign investment while ensuring financial stability. The government may need to implement measures that encourage foreign banks to reinvest their profits in the local economy or reinvigorate domestic investment strategies to avoid over-reliance on foreign capital.
In conclusion, while foreign banks’ profits and dividends continue to grow in Pakistan, the increase in capital repatriation serves as both a testament to the country’s improving economic landscape and a signal for policymakers to carefully manage these outflows to safeguard Pakistan’s long-term economic health.