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April 27, 2019

Repatriation of profits, dividends falls 34.43pc in July-March

Business

April 27, 2019

KARACHI: Outflow of profits and dividends on foreign investments from the country dropped 34.43 percent to $1.049 billion in the nine months of 2018/19 fiscal year, the central bank’s data showed on Friday.

The country paid $55 million as profits and dividend in March, compared with $76.4 million in the previous month. The decline in the profits and dividends from the foreign firms was driven by depreciation of the rupee against the dollar, as the profits and dividends were paid in the local currency and after that converted into greenback to send home from multinational companies.

The rupee has fallen by 31 percent since December 2017. The exchange rate dropped by 16.33 percent since July 2018.

Moreover, foreign companies seem to invest their repatriated earnings to expand operations in Pakistan. The payments on foreign direct investments (FDI) went down to $889.0 million in July-March FY19 from $1.376 billion a year earlier.

The payments on foreign portfolio investments were $160.3 million. That compared with $223.5 million in the same period last year.

The persistent slowdown in Chinese investments, increasing cost of doing business and economic uncertainty led a decline in the FDI during the period under review. FDI plunged 51.4 percent to $1.273 billion during the nine months of the current fiscal.

The central bank’s data showed that some key sectors such as food, power, communications, financial business, and oil and gas exploration remitted lower profits to their parent companies abroad.

The power sector repatriated $88.8 million worth of profits, whereas it had repatriated a much higher profit of $184.7 million last year.

Profit outflows from the financial businesses stood at $137.2 million, compared with $194.1 million in the nine months of FY18.

Outflow of profits from telecommunications amounted to $71.3 million during July-March. The outflows were $166.8 million in the corresponding period last year. Energy firms repatriated $167.9 million, compared with $202 million in the same period last year.

A country-wise break up on repatriation of profit/dividend revealed that Chinese firms repatriated 59 million abroad during July-March FY19, compared with $146.1 million a year ago. Repatriated profits of the UK firms fell to $222.3 million from $335.4 million a year earlier.

The State Bank of Pakistan, in its second quarterly report said that the decline in profit repatriation on foreign investment helped alleviate some of the pressure on the current account. The current account deficit narrowed 29 percent to $9.588 billion during July-March 2018/19 from $13.589 billion a year ago.

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