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Multinational corporations operating in Pakistan have found it difficult to repatriate their profits because of a shortage of dollars, Bloomberg reported on Thursday.
It noted that firms including Nestlé, Unilever and Philip Morris had around one to two billion dollars’ worth of profits stuck in Pakistan due to an acute dollar shortage which had started earlier this year.
“Between $1 billion and $2 billion in earnings from firms including Nestlé SA, Unilever Plc and Philip Morris have been stuck in Pakistan’s banks for almost 18 months,” the report said.
However, speaking to Bloomberg, Philip Goh, the regional vice president for Asia Pacific at the International Air Transport Association, said: “Recently, the situation has improved slightly with a $47 million outflow in August. The value of funds that foreign airlines want to send out of the country, for instance, has decreased since the beginning of the year.”
Applying for currency repatriation in Pakistan is an arduous task, according to Goh. Companies need an auditor’s certificate showing the amount to be remitted, which means they have to undergo an audit monthly rather than an annual one. This adds to the operating cost in Pakistan and prolongs the process.
The problem has been exacerbated by the country’s economic woes, including the plunging rupee — which has of late changed direction — and high inflation.
Companies are trying to adapt to the situation by seeking out banks that have access to dollars, investing profits in government securities, and reducing their reliance on imports, the report said.
However, the dollar shortage is proving to be a major challenge for multinationals, and some are considering pulling their business out of Pakistan altogether.
“Over time, if conditions persisting in a country make the economics of operation to that country unsustainable, it is reasonable to expect airlines to consider deploying their aircraft assets to better use elsewhere,” Goh said, according to the report.
The government is aware of the problem and is trying to attract foreign investment by offering tax breaks and other incentives. However, it remains to be seen whether these steps will be enough to convince multinationals to stay in Pakistan.
Moreover, Dawn reported the conditions of Pakistan’s foreign exchange reserves, which had been dismally low during July and August reflecting the rupee’s devaluation during that time.
The dollar’s value had gone up to Rs307 in early September. But the rupee’s value has begun to recover, appreciating by 7.5pc from its lowest point, which will be visible in September’s data.
The country’s total foreign exchange reserves stand at $13.03bn, including $5.42bn held by commercial banks.
Despite the rising operating cost to repatriate profits, companies have a hopeful outlook given the improving rupee in September and Pakistan’s “rapid urbanization and young population.”