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February 27, 2020

Foreign firms’ profit repatriation rises to $946mln in July-Jan

Business

February 27, 2020

KARACHI: Foreign companies operating in Pakistan repatriated $946.6 million in profit and dividends on investments in the country in the first seven months of the current fiscal year; although the growth was marginal year-over-over, it depicted resilience of the firms mainly in energy and transport sectors in the face of economic slowdown, the central bank’s data showed on Wednesday.

Profit repatriation rose 3.12 percent from $917.9 million in the same period of last fiscal year. In January, however, the repatriated earnings amounted to $110.3 million, down 33.63 percent from the previous month. Analysts attributed the nominal increase in repatriated earnings of foreign companies to improvement in corporate profitability, stable rupee and pick-up in processing of foreign remittances.

Foreign investors earn profits in rupees, but convert these amounts to foreign currencies, mainly dollars, and then repatriate them to their head offices across the world.

Analysts said an expected upward trend in foreign investment could lead to higher profit outflows in the coming months. In July-January, highest profit outflows were from the oil and gas exploration sector, amounting to $181.3 million, compared with $129.2 million in the same period last year, the SBP’s figures showed. Profit outflows from financial businesses increased to $157 million from $136.8 million. Transport sector repatriated $139.7 million, compared to $35.9 million.

The country witnessed higher profit outflows to the United Kingdom in the period under review. British companies sent $218.2 million to their headquarters, compared to $181.5 million.

The SBP’s data further showed that repatriated cash on foreign direct investment rose to $842.3 million in July-January FY2020 from $776 million in the corresponding period of FY2019. Profit repatriation on foreign portfolio investment, however, declined to $104.2 million from $141.9 million.

Analysts said foreign investment in the country is on a rising trajectory, which in turn has spiked the profit outflows. Foreign direct investment jumped 65.7 percent to $1.563 billion in the seven months of this fiscal year.

Foreign investors are optimistic about the FDI outlook in Pakistan, according to the 2019 perception and investment survey of Overseas Investors Chamber of Commerce and Industry.

Seventy five percent of the survey’s respondents indicated they would recommend FDI in Pakistan to their parent companies. Seven out of 10 respondents said their parent organisations would invest more or at least a similar amount in the next 1-5 years, to the investment made over the last corresponding period.

The survey found that FDI outlook in Pakistan is stable despite challenges and at par with the last two years considering that many of the projects which were in the pipeline especially in the energy and other sectors have made progress as per plans.