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September 30, 2020

Profit repatriation by MNCs increases 90pc in July-August

Business

September 30, 2020

KARACHI: Multinational companies (MNCs) have repatriated $407.6 million in profits to their overseas headquarters in the first two months of 2020/21, up 90 percent from the same period last year, the central bank data showed on Tuesday.

They dispatched the profit earned on investment in different sectors of the economy and Pakistan Stock Exchange (PSX).

The repatriated earnings stood at $214.7 million in the corresponding period of the fiscal year 2019/20.

Breakdown suggests foreign firms have repatriated profit of $391.7 million against long-term foreign direct investments (FDIs) in different sectors like oil and gas exploration, communication and power sectors.

Besides, they sent profit worth $15.9 million against investments in shares at the local bourse.

Their repatriation of profit includes $99.1 million on investment in the food sector, $90 million against investment in financial business, $65.7 million from the telecommunication sector and $48.4 million from tobacco and cigarettes sector during the period under review.

Foreign firms repatriated a significant portion of the total profit to the United Kingdom. They dispatched profit worth $197.8 million to the UK in the two months, followed by $57.8 million to the United States.

They sent $47.1 million to Malta, $18.1 million to Switzerland and $17.5 million to Hong Kong.

Substantial increase in repatriated earnings of foreign companies is due to the rise in corporate profitability, recovery in investor confidence after the economy reopened, and pick up in the processing of foreign currency remittances.

The economic activity started rebounding in June owing to the ease of coronavirus-related restrictions in the country. Businesses had reopened, while factories managed to resume production activities.

These factors contributed to the increase in the corporate earnings, compelling foreign companies to send back higher profits.

Analysts said the increase in repatriated earnings was a positive sign. It showed foreign investors were making money on their investment in the country, and sending this back to their headquarters overseas. It also indicates investor confidence was improving in the country’s economy.

The SBP data showed that the repatriated profits and dividends were higher than the amount of FDI fetched by the country in the period under review.

FDI stood at $226.7 million in July-August FY2021. That compared with $162.0 million in July-August FY2020.