Friday January 21, 2022

Repatriation of profits, dividends falls 16.5 percent in July-October

November 28, 2021

Repatriation of profits, dividends falls 16.5 percent in July-October

KARACHI: The outflow of profits and dividends on foreign investments from Pakistan dropped 16.5 percent to $566 million in the first four months of the current fiscal year, the central bank’s latest data showed.

The repatriation of profits and dividends stood at $678 million in July-October FY2021.

The slowdown in the repatriated earnings in the July-October FY2022 was largely driven by food, telecommunications, financial businesses and transport sectors.

The profit repatriation on FDI dropped to $514 million in July-October FY2022 from $648 million a year earlier.

The outflow as payment against portfolio investment, however, rose to $52 million, compared with $30 million in July-October FY2021. .

The figures issued by the State Bank of Pakistan (SBP) showed that financial businesses saw the highest outflows, as the sector sent home $125 million in repatriated earnings in July-October FY2022, compared with $91 million in the same period last year.

The outflows from the food sector fell to $84 million from $161 million a year earlier.

The outflows from the transport sector stood at $42 million in four months of FY2022. This sector repatriated $69 million a year ago.

Profit outflows from the telecommunications sector declined to $52 million from $103 million.

In terms of the country of origin for the multinational firms, the US companies repatriated $98.8 million overseas, compared with $109 million a year earlier.

The Covid-19 and the resultant mobility restrictions dissuaded major corporations and investors from starting new projects in many industrial sectors. Also, the sharp drop in global oil prices after the pandemic had rippled across fresh investment into both upstream (extraction) and downstream (refining and retail) oil sectors.

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

FDI into Pakistan dropped 12 percent to $662 million in July-October FY2022.

The decline in the profits and dividends by the overseas companies shows shaking their confidence in the country’s economy. This also reveals a slowdown in the profitability of these companies in the host country.

However, the lower repatriation of profits and dividends is a positive for the balance of payments as it could ease pressure on the foreign exchange reserves of the country.