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July 27, 2019

Foreign firms repatriate 21.33pc less profit in FY19


July 27, 2019

KARACHI: The outflow of profits and dividends on foreign investments from the country fell 21.33 percent to $1.825 billion in the last fiscal year of 2018/19, the State Bank of Pakistan (SBP) data showed on Friday.

Multinational companies’ repatriated $151.3 million earning s in June from $436.1 million in previous month.

Analysts said economic slowdown, declining corporates’ profitability and currency depreciation dented profits on foreign investment.

“Multinationals profit growth is likely to squeeze further with on pressure on rupee,” said an analyst “This indicates returns on existing investments are going south, which is not a positive sign for the future outlook of foreign investment.”

The payments on foreign direct investment (FDI) fell to $1.577 billion in July-June FY2019 from $2.008 billion a year ago. The payments on foreign portfolio investment stood at $247.7 million, compared with $311.5 million in the previous year.

A decline in Chinese investments, rising cost of doing business and economic slowdown drag on foreign direct investment into Pakistan. FDI inflows to the country remained subdued given the shaky perceptions of foreign investors about the country’s economic conditions. FDI flows shrank 50 percent to $1.737 billion in FY2019.

The SBP’s figures showed less repatriation of profits in all major sectors.

Some key sectors such as food, power, communications, financial business, and oil and gas exploration remitted lower profits to their headquarters abroad.

The power sector repatriated $135.1 million worth of profits, whereas it had repatriated a much higher profit of $240.8 million in the previous fiscal year.

Profit outflows from the financial businesses stood at $273.3 million, compared with $314.4 million in the 12 months of FY2018.

Outflow of profits from telecommunications amounted to $302 million.

The outflows were $327.8 million in the corresponding period of previous year.

Energy firms repatriated $258.5 million in July-June FY2019, compared with $259 million in FY2018.

A country-wise break up on repatriation of profit/dividend revealed that Chinese firms repatriated $87.1 million abroad during FY2019, compared with $184 million in previous year.

Repatriated profits of the UK firms fell to $364.5 million from $452.4 million.

The fall in profit repatriation on foreign investment had positive implications for the balance of payments. The current account deficit narrowed 32 percent to $13.587 billion in July-June fiscal year 2019 from $19.897 billion in preceding year.

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