US Dollar may hit back hard against Pakistani Rupee once this single restriction is removed: report
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Multinational corporations operating in Pakistan have been grappling with a challenging financial situation, unable to repatriate their substantial profits back to their home countries. According to a report published by Bloomberg, an estimated $1 to $2 billion in earnings are currently stranded within the country. This predicament has persisted for approximately 18 months and has impacted major players in the market, including renowned companies such as Nestle, Unilever, and Philip Morris.
It's feared that once the multinational companies withdraw their profits and sent back home then there would be shortage of dollars and the dollar rate will rise back again.
The Karachi-based chamber of commerce for multinationals has voiced concerns about the dire situation. Their report reveals that these multinational giants have been unable to move their profits out of local Pakistani banks, a situation exacerbated by the country's economic circumstances. Over the course of the last fiscal year, the repatriation of profits and dividends by foreign investors experienced a staggering decline of $1.349 billion, marking an 80 percent decrease and reaching the lowest level in eighteen years.
The devaluation of the Pakistani Rupee (PKR) over the past 18 months has further complicated matters, forcing these companies to retain their profits within the country, ultimately leading to financial losses. Seeking a resolution, Unilever Pakistan's Chief Financial Officer has initiated discussions with local authorities to address the issue of profit repatriation. Similarly, Nestle Pakistan has also been in contact with relevant authorities to navigate this challenging situation.
The situation, however, seems to be showing signs of improvement in the current fiscal year (FY24). During the first two months of FY24, there has been a notable upswing, with foreign investors successfully repatriating profits and dividends. According to data from the State Bank of Pakistan (SBP), foreign investors repatriated a total of $49.2 million during this period, reflecting a substantial increase of $21 million.
Despite the ongoing challenges, there is a glimmer of hope. A spokesperson from Philip Morris (Pakistan) Ltd expressed optimism that the situation will gradually improve over the long term, aiming to rebuild the confidence of foreign investors in Pakistan's economic stability.
