Profit repatriation rises to $548.1 million in July-October

KARACHI: Repatriation of profits and dividends by foreign investors increased 10.28 percent to $548.1 million in the first four months (July-October) of the current fiscal year, the central bank’s data showed on Wednesday.

Repatriation of profits and dividends on foreign investment stood at $497 million in the corresponding period of the last fiscal year. The flow of profits repatriated by multinational firms rose to $198.9 million in October from $134.5 million in the previous month.

Analysts said foreign investment in the country has been increasing for the last four months, which in turn, has spiked the profit outflows, as well. “Foreign companies continued to repatriate earnings, reflecting a boost from pickup in economic activities, stable exchange rate and improved corporate profitability,” an analyst said.

Some analysts see an upward trend in the profit repatriation, as a ‘negative sign’ for the country’s current account balance. “The increase in profit repatriation by the foreign companies could have negative implications for the current account balance, affecting the country’s ability to make payments on its foreign debt obligations,” he said.

The current account deficit contracted 73.5 percent to $1.5 billion in the first four months of the current fiscal year. It had posted a surplus of $99 million in October 2019. The profit repatriation was more than the net foreign direct investment (FDI) received by the country in the period under review. FDI flows to the country surged to 238.7 percent in the four months of the current fiscal year.

Pakistan drew $650 million in FDI in July-October fiscal year 2019/20, compared with $191.9 million in the corresponding period of the last year. The SBP’s data also showed that repatriated cash on FDI rose to $499.3 million in July-October FY20 from $419.4 million a year earlier.

The profit repatriation on foreign portfolio investment; however, fell to $48.9 million from $77.7 million. All major sectors such as food, chemicals, oil and gas exploration, transport and financial business repatriated higher profits, compared with last year.

Oil and gas exploration repatriated $97.8 million in July-October FY20, compared with $78.3 million in the corresponding period last year. The SBP’s figures showed that profit outflows from financial businesses increased to $112.1 million from $70.5 million.

The chemical sector repatriated $64.4 million in July-October FY20, compared with $23.3 million in the corresponding period of FY19. The transport sector repatriated $77.4 million in three months of this fiscal year, compared with $19.4 million last year, it said.