Repatriation of profit falls to $28.2 million

KARACHI: Profit and dividends earned by the multinational companies (MNCs) on investment in various sectors of the economy dropped 93 percent to $28.2 million in the first two months of this fiscal year, the central bank data showed on Tuesday.

MNCs sent $396.4 million to their headquarters overseas in the same period of last fiscal year.

In August, the profit and dividends on foreign investment stood at $11.8 million.

Data issued by the State Bank of Pakistan further revealed that foreign firms repatriated profit of $26.6 million against the foreign direct investments in various businesses in July-August FY2023. That compared with $372.8 million in the corresponding period last year.

Moreover, they made a profit worth $1.6 million against investments in shares at the local bourse. These earnings stood at $23.6 million a year earlier.

A decline in the repatriated earnings of the foreign firms was driven by lower outflows in the financial and power sectors in two months of the current fiscal year.

Profit outflows from the financial businesses sharply dropped to $0.3 million in July-August FY2023 from $76.6 million a year ago.

Outflows from the power sector registered at $11.3 million in July-August FY2023. These outflows amounted to $17.3 million in the corresponding period of last year.

Similarly, outflows from the oil and gas exploration sector fell to $0.3 million from $1.4 million.

The slowdown in corporate profitability has contributed to the decrease in the repatriated earnings of foreign firms.

Foreign investor confidence in Pakistan’s economy remains dismal, despite the revival of the International Monetary Fund programme.

However, the fall in profit repatriation on foreign investment is a positive development for the balance of payments. The current account deficit narrowed 54 percent to $703 million in August from $1.5 billion a year ago due to an increase in exports and a slight decline in imports.

The current account gap declined by $0.5 billion or 19 percent to $1.9 billion in the first two months of this fiscal year.