Outflow of profits rises by 10.5pc as FDI plunges by 33.3pc during FY26

ISLAMABAD: The outflow of profits and dividends from Pakistan witnessed a significant increase of 10.5 per cent during the first 11 months of the current fiscal year (July-May FY26), while foreign direct investment (FDI) recorded a sharp decline of 33.3 per cent during the same period, according to data from the State Bank of Pakistan (SBP).

Rising profit repatriation

The repatriation of profits and dividends by foreign companies operating in Pakistan rose to $2.53 billion during July-May of FY26, compared to $2.29 billion in the corresponding period of the previous fiscal year, reflecting an increase of 10.5 per cent. This growing outflow indicates that multinational companies continued to send a larger share of their earnings back to their parent entities abroad.

In the month of May alone, the outflow of profits and dividends stood at $210.7 million, compared to $168.8 million in May of the previous year, marking a year-on-year increase of approximately 24.8 per cent.

Sharp decline in FDI

On the other hand, foreign direct investment into Pakistan fell sharply by 33.3 per cent during the first 11 months of FY26. The country received $1.46 billion in FDI during July-May FY26, down from $2.19 billion in the same period of FY25.

The decline in FDI highlights the challenges Pakistan faces in attracting fresh foreign investment, even as the country has been undertaking economic reforms under the International Monetary Fund (IMF) programme and working to stabilise its macroeconomic indicators.

In May FY26, net FDI inflows stood at $134.6 million, compared to $183.9 million in May FY25, registering a year-on-year decline of approximately 26.8 per cent.

Widening gap between inflows and outflows

The data underscores a growing imbalance between the profits being repatriated by foreign investors and the fresh investment flowing into the country. While the outflow of profits and dividends continued to rise, the inflow of new foreign investment shrank considerably, putting additional pressure on the country's external account.

The combined effect of rising profit repatriation and falling FDI has implications for Pakistan's current account and balance of payments position. Profit repatriation is recorded as a debit in the current account under the primary income category, and an increase in this outflow without a corresponding rise in FDI can widen the current account deficit.

The trend also raises questions about Pakistan's ability to retain and attract foreign capital amid a competitive global investment landscape. The decline in FDI during FY26 comes despite government efforts to offer incentives and improve the business environment for foreign investors, including through special economic zones and targeted policy measures.