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January 27, 2021

Profit repatriation increases 7pc to $892.3mln in first half

Business

January 27, 2021

KARACHI: Foreign firms operating in Pakistan sent $892.3 million in profits and dividends to their parent companies abroad during the first half of the current fiscal year of 2020/21, up around seven percent year-on-year as economic activities rebounded following the deadliest impact of coronavirus lockdown, the central bank’s data showed on Tuesday.

The State Bank of Pakistan’s (SBP) data showed that profit and dividend repatriation stood at $836.3 million in the corresponding period of last fiscal year.

In December, foreign companies repatriated $144.2 million in profits and dividends to their headquarters compared with $69.4 million in the previous month, according to the SBP.

The rise in the repatriation of profits and dividends on foreign investments clearly shows growing earnings of companies in the country amid the coronavirus challenges. Income earned by the branches and subsidiaries of multinational firms can be either reinvested in the host country or repatriated in the form of profits and dividends to the parent companies.

Pakistan’s consumption-based economy contracted 0.4 percent during the last fiscal year due to falling demand. However, the economy is fast coming back on growth trajectory due to revival of economic activities following the lifting of lockdown in August last year.

The growth is projected in the range of 1.5 to 2 percent during the current fiscal year.

The increasing repatriated earnings reflect an improvement in the financial performance of the country’s corporate sector. These outflows also indicate foreign investor confidence in Pakistan’s economy.

The foreign direct investment attracted by the country amounted to $952.6 million in July-December FY2021, higher than repatriation of profits and dividends.

The SBP’s data revealed that profits on foreign direct investment increased to $840.1 million in the July-December period from $743.2 million in the corresponding period a year ago.

Food, communications, tobacco and cigarettes accounted for major outflows in the six months of this fiscal year. The outflows from the food sector registered at $172.9 million in July-December FY2021. These outflows amounted to $54.6 million in July-December FY2020. Profit outflows from the communications sector increased to $119.5 million from $33.1 million.

The SBP’s data further revealed that $318 million was repatriated to the United Kingdom during July-December FY2021 from $176.3 million a year earlier. The U.S, companies sent $152.6 million cash to their parent companies in July-December FY2021 compared with $132.8 million last year.

The outflow as payment against portfolio investment stood at $52.2 million in July-December FY2021 compared with $93.1 million in July-December FY2020.