Multinational corporations operating in Pakistan have been grappling with achallenging financial situation, unable to repatriate their substantialprofits back to their home countries. According to a report published byBloomberg, an estimated $1 to $2 billion in earnings are currently strandedwithin the country. This predicament has persisted for approximately 18months and has impacted major players in the market, including renownedcompanies such as Nestle, Unilever, and Philip Morris.
It’s feared that once the multinational companies withdraw their profitsand sent back home then there would be shortage of dollars and the dollarrate will rise back again.
The Karachi-based chamber of commerce for multinationals has voicedconcerns about the dire situation. Their report reveals that thesemultinational giants have been unable to move their profits out of localPakistani banks, a situation exacerbated by the country’s economiccircumstances. Over the course of the last fiscal year, the repatriation ofprofits and dividends by foreign investors experienced a staggering declineof $1.349 billion, marking an 80 percent decrease and reaching the lowestlevel in eighteen years.
The devaluation of the Pakistani Rupee (PKR) over the past 18 months hasfurther complicated matters, forcing these companies to retain theirprofits within the country, ultimately leading to financial losses. Seekinga resolution, Unilever Pakistan’s Chief Financial Officer has initiateddiscussions with local authorities to address the issue of profitrepatriation. Similarly, Nestle Pakistan has also been in contact withrelevant authorities to navigate this challenging situation.
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The situation, however, seems to be showing signs of improvement in thecurrent fiscal year (FY24). During the first two months of FY24, there hasbeen a notable upswing, with foreign investors successfully repatriatingprofits and dividends. According to data from the State Bank of Pakistan(SBP), foreign investors repatriated a total of $49.2 million during thisperiod, reflecting a substantial increase of $21 million.
Despite the ongoing challenges, there is a glimmer of hope. A spokespersonfrom Philip Morris (Pakistan) Ltd expressed optimism that the situationwill gradually improve over the long term, aiming to rebuild the confidenceof foreign investors in Pakistan’s economic stability.