Repatriation of profits, dividends drops 55pc in July

KARACHI: The outflow of profits and dividends on foreign investments from Pakistan dropped 55 percent to $159.2 million in the first month of the current fiscal year, the central bank’s data showed on Thursday.

The repatriation of profits and dividends stood at $354.5 million in July 2020.

Analysts said it was too early to figure out why the multinationals sent back low profits and dividends to their headquarters overseas by seeing only one month's data. However, a decline in July’s repatriated earnings of the foreign firms operating in Pakistan reflects a slowdown in their profitability.

Moreover, the coronavirus-related uncertainties constrained global direct investment flows to advanced and developing economies. The overall weak global trends were also partially responsible for the tepid FDI inflows to Pakistan. Besides, the uncertainty about the future of the IMF’s loan programme also faded their optimism about Pakistan’s recovery prospects.

So, foreign investors were reluctant to make fresh investments into the various sectors of Pakistan. This shows that foreign investors made fewer profits on their investments, which resulted in a significant decrease in repatriated earnings in the first month of FY2022.

FDI into Pakistan dropped 30 percent to $89.9 million in July.

Profit repatriation on FDI dropped to $141.1 million in July 2021 from $340.2 million a year earlier.

Outflow as payment against portfolio investment, however, rose to $18.2 million, compared with $14.3 million in July 2020.

The figures issued by the State Bank of Pakistan showed that financial businesses saw the highest outflows, as this sector sent home $23.3 million in repatriated earnings in July 2021, compared with $90 million in the same period last year.

Outflows from the food sector fell to $0.5 million in July 2021 from $99.1 million a year earlier.

Chemical sector outflows stood at $13.8 million in July 2021. This sector repatriated $18.7 million a year ago.

There was zero repatriation of profits and dividends from the oil and gas exploration sector in the month under review, despite an increasing trend in the global oil prices.

Profit outflows from the telecommunications sector declined to $46.6 million from $50.7 million.

British companies sent $26.3 million to their headquarters in July FY2022, compared with $179.7 million last year, showing a sharp decline. Similarly, US companies repatriated $11.4 million overseas, compared with $53.3 million a year earlier.

The lower repatriation of profits and dividends could ease pressure on the foreign exchange reserves of the country.