Friday September 24, 2021

Profit repatriation surges 20pc to $1.622bln in FY2021

July 29, 2021

KARACHI: Profit and dividend repatriations by foreign investors – both on direct and portfolio investments – increased by 20 percent to $1.622 billion in the fiscal year ended June 30 from $1.345 billion a year ago, the central bank data showed on Wednesday.

The outflow of profits and dividends stood at $125.8 million in June.

The country attracted $1.847 billion in foreign direct investment (FDI) in July-June FY2021, compared with $2.597 billion in the same period of the previous fiscal year.

Profit repatriation on FDI rose to $1.490 billion in FY2021 from $1.203 billion a year earlier.

The outflow as payment against portfolio investment, however, fell to $131.9 million last year, compared with $142.9 million in FY2020.

The repatriation was most visible across sectors where profitability has surged over the past years, such as food, tobacco, telecom and financial businesses.

However, lower repatriation from the energy sector, including both the upstream (exploration) and downstream (refining and retail sales) segments mainly due to the lower global oil prices, helped contain the increase in overall repatriations during the period under review.

The outflows from the food sector recorded at $231.4 million in FY2021. These outflows amounted to $59.6 million in FY2020.

The outflows from tobacco and cigarettes stood at $125.7 million in 12 months of FY2021. This sector repatriated $37.4 million a year ago.

Profit outflows from the communications sector increased to $234.2 million from $154.4 million.

Financial businesses repatriated $337.3 million in FY2021, compared with $238.8 million in FY2020.

The repatriation of profits and dividends by the oil and gas exploration sector fell to $108.1 million from $250.6 million.

The increase in the repatriated earnings of the foreign investors is a healthy sign for the country’s economy, showing their optimism about Pakistan’s recovery prospects.

However, higher repatriation of profits and dividends could put pressure on the foreign exchange reserves.

The State Bank of Pakistan in its latest monetary policy statement projects economic growth to rise from 3.9 percent in FY2021 to 4-5 percent this year

It noted that the market-based flexible exchange rate system, resilience in remittances, an improving outlook for exports, and appropriate macroeconomic policy settings should help contain the current account deficit in a sustainable range of 2-3 percent of GDP in FY2022.

Notwithstanding this moderate current account deficit, the country’s foreign exchange reserves position is expected to continue to improve this year due to adequate availability of external financing, it said.

In August, Pakistan’s reserve buffers are expected to rise by another $2.8 billion through the IMF’s planned new global SDR allocation, it added.