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Foreign firms sent home $1.9bn in July-May


7/4/2017

KARACHI: Foreign companies working in Pakistan repatriated $1.88 billion in profits and dividends to their home countries in the 11 months through May, a year-on-year increase of nearly 7 per cent, the State Bank of Pakistan said on Monday.

The amount was almost equal to the foreign direct investment (FDI) of $2bn Pakistan attracted during the same period. Moreover, remittances sent by Pakistanis working abroad and the country’s exports are also in decline.

The highest FDI was received by the power sector during the period. However, the highest amount was repatriated from the food sector thanks to the landing of international food chains in Pakistan during the last five years.

Inflows to the food sector were also higher this year, due mainly to the sale of a majority stake in Engro Foods to FrieslandCampina, one of Europe’s biggest dairy companies. The sector saw no inflow a year ago. Instead, there was an outflow of $53m.

Another change was noted in banks and financial institutions, which received $63m in FDI but the profits and dividends sharply increased to $219m, the second-highest outflow this year.

The power sector received $548m in FDI during the 11-month period while the outflow of profits and dividends was $150m. Inflows to the power sector dropped this year despite government efforts to boost the amount. The inflow during the same period of the last fiscal year was $703m.

The biggest change was noted in the construction industry which received the third-highest amount of FDI, i.e. $418m. The inflow was just $45m in the same period a year ago, indicating that the escalating property prices and housing demand attracted foreign companies to make big money.

However, the outflow as profits and dividends from this sector during the July-May period was just $900,000. The outflow may increase in the next couple of years since the construction is a long-term investment.

FDI in oil and gas exploration companies also dropped to $135m from $235m a year ago, whereas the outflow as profits and dividends was $85.3m in July-May 2016-17.

The total outflow in the outgoing fiscal year could top $2bn, which would be a fairly big amount for the country, particularly against the backdrop of falling remittances, declining exports and a trade deficit of about $30bn.

The current account deficit nearly trebled to $8.9bn during July-May, due mainly to poor exports. The massive increase in the current account deficit can hit the exchange rate regime as foreign exchange reserves have been continuously declining since October. The country’s reserves are still over $20bn, but rising debt servicing is expected to bring them down.

Source: Dawn