Profit repatriation falls 10.7pc to $214.7mln in July-August

KARACHI: Repatriation of profits and dividends by foreign investors dropped 10.73 percent to $214.7 million in the first two months of the current fiscal year, mostly owing to sluggish business proceeds, high borrowing cost, and general economic slowdown, central bank data showed on Thursday.

State Bank of Pakistan (SBP) released numbers presented the flow of cash repatriated back by multinational companies fell down 44.64 percent to $76.5 million in August from $138.2 million in the previous month.

The SBP noted a modest around 10 percent decline in repatriated cash on foreign direct investment, which stood at $197.4 million in July-August period of the this fiscal year, compared with $218.8 million in the corresponding period last year. And $17.3 million of repatriation took place on foreign portfolio investment in the first two months.

Repatriated earnings on foreign portfolio investment amounted to $21.7 million in July-August last year. Analysts said a slowdown in business activity, amid slumping economic growth, monetary tightening and fiscal consolidation lead to lower repatriated earnings.

Moreover, the squeeze in corporate profitability deterred repatriated flows in the period under review. Therefore, multinational firms didn’t manage to offer hefty payouts and dividends.

Currency devaluation also hit repatriation of profits and dividends. However, rupee stabilised and appreciated around 2 percent against the dollar between July and August; trading at an average of 159 to the dollar in July, compared with 156/dollar last month.

“If the declaration in the GDP growth continues, we expect to see the repatriation flow slowing in the rest of this fiscal year,” said an analyst. “Uncertain business sentiment and environment could also hamper repatriation flows,” he added.

Foreign direct investment into Pakistan fell 58.4 percent to $156.7 million in the period under reveiew. The SBP’s figures showed the financial businesses repatriated $31.4 million in July-August, compared with $15 million in the same period last year.

Profit outflows from energy firms fell to $42.2 million from $38.7 million. The transport sector repatriated $30 million in the two months of this fiscal year, compared with $6 million in the same period a year ago, while communication sector saw a repatriation of $6.1 million, compared to $0.8 million in July-August last year.