Profit outflows cross $1bln in seven months

KARACHI: The repatriation of profits and dividends on foreign investment in Pakistan has crossed $1 billion mark in the seven months of this fiscal year due to higher earnings of multinational companies and improvement in the confidence of foreign investor in the country’s economy.

Data issued by the State Bank of Pakistan (SBP) on Friday showed that profit outflows rose 8 percent to $1.025 billion in July-January FY2021.

The outflows stood at $946.6 million in the corresponding period of the last fiscal year.

Multinational companies repatriated $133.3 million as profits and dividends to their headquarters in January, compared with $1,442 million in the previous month.

The increase in the repatriation of profits and dividends on the foreign investment is attributed to the better profitability of the foreign firms operating in Pakistan. The rising repatriated earnings indicate an improvement in the financial performance of the country’s corporate sector. These outflows also reflect foreign investor confidence in Pakistan’s economy.

The foreign direct investment (FDI) attracted by the country amounted to $1.145 billion in July-January FY2021, higher than repatriation of profits and dividends of $1.025 million in the same period of the current fiscal year.

SBP’s data revealed that profit repatriation on FDI rose to $961.6 million in July-January FY2021 from $842.3 million a year ago.

The outflow as payment against portfolio investment stood at $63.9 million, compared with $104.2 million in July-January FY2020.

Food, communications, and tobacco and cigarettes accounted for major outflows in the seven months of this fiscal year.

The outflows from the food sector registered at $220.9 million in July-January FY2021. These outflows amounted to $54.6 million in the same period during FY2020.

Profit outflows from the communications sector increased to $119.5 million from $33.2 million.

The data further revealed that $361.8 million was repatriated to the United Kingdom during the seveon-month period of FY2021 from $218.2 million a year earlier.

US companies sent $195.2 million cash to their parent companies in July-January FY2021, compared with $144.3 million last year.

Analysts said the resumption of the $6 billion International Monetary Fund (IMF) bailout programme for Pakistan, positive macroeconomic indicators and the launch of vaccinations could improve investor sentiment about the country’s economic outlook.

These factors were expected to result in increasing profit outflows in the coming months.