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November 1, 2018
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Multinational firms’ profit repatriation: falls 18.61pc to $347.6mln in Q1

Business

November 1, 2018

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KARACHI: The outflow of profits and dividends on foreign investments from the country fell 18.61 percent to $347.6 million in the first quarter of current fiscal year of 2018/19, the State Bank of Pakistan (SBP) data showed on Wednesday.

The country paid $107.1 million as profits and dividends in September, compared with $103.7 million in previous month.

The payments on foreign direct investments (FDI) dropped to $318.3 million in the first three months of FY19 from $386 million a year ago period.

The payments on foreign portfolio investments remained at $29.3 million. That compared with $41.2 million in the corresponding period of last year.

FDI inflows to the country remained subdued given the shaky perceptions of foreign investors about the country’s economic conditions. Net FDI flows declined 43 percent to $439.5 million in the first quarter of the current fiscal year.

The SBP’s data showed that key sectors such as power, communications, financial business and chemical remitted lower profits to their parent companies abroad.

The power sector repatriated profits worth of $37.9, whereas it had repatriated a

much higher profit of $52 million in the last fiscal.

Profit outflows from the financial businesses stood at $28.6 million, compared with $98.6 million in the first quarter of FY18.

Outflow of profits from communications amounted to $10.6 million during July-September. The outflows were $40.7 million in the corresponding period of last year.

Analysts said decline in profits and dividends from multinational firms is a positive development for the country’s current account deficit.

“The fall in profit repatriation by the multinational companies is expected to provide some relief to the current account balance, improving the country’s ability to make payments on its foreign debt obligations,” said an analyst.

However, the SBP, in its annual report for FY18 stated that the interest income payments may increase substantially

during the current fiscal year amid expectations of persistent hike in the global interest rates.

“Repatriation of higher profit by foreign firms’, together with the rising interest payments, increased the primary income deficit that actually declined last year; adding further to the current account imbalance,” the report said.

“While both profit and interest payments have risen in FY18, the rise in the latter was more pronounced compared to the former. In FY18, Pakistan paid $ 2.7 billion in interest on foreign loans and bonds, 33.5 percent higher from FY17.”

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