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June 26, 2019

MNCs repatriate $1.673bln in July-May

Business

June 26, 2019

KARACHI: Repatriation of profits and dividends by foreign companies operating in Pakistan stood at $1.673 billion in the first 11 months of the current fiscal year, down 25.21 percent from a year earlier, figures published by the State Bank of Pakistan showed on Tuesday.

However, earnings repatriated by multinational companies rose to $436.1 million in May from $188.4 million in the previous month. Analysts said economic slowdown, falling profitability of corporates, and currency depreciation have made it harder for many MNCs to repatriate more cash from Pakistan.

“Repatriation of profit on foreign investment continue to decline, as the corporate sector’s margins remained under pressure with the local currency seeing a sharp devaluation,” an analyst said.

“This shows returns on existing investments are going down, which is not a healthy sign for the future prospect of foreign investment.” The profits and dividend are paid in rupee and then converted into dollar to be sent by foreign companies.

The rupee has fallen by 38 percent in 2018. The payments on foreign direct investment (FDI) fell to $1.445 billion in July-May FY19 from $1.946 billion a year ago. The payments on foreign portfolio investment stood at $228.0 million, compared with $290.7 million in the same period of last year.

The decline in Chinese investments, rising cost of doing business and economic slowdown drag on FDI. FDI flows shrank 49.2 percent to $1.606 billion in July-May FY19. The central bank’s data showed that some key sectors, such as food, power, communications, financial business, and oil and gas exploration remitted lower profits to their headquarters abroad.

The power sector repatriated $129.7 million worth of profits, whereas it had repatriated a much higher profit of $231.6 million last year. Profit outflows from the financial businesses stood at $251.1 million, compared with $280.3 million in the 11 months of FY18.

Outflow of profits from telecommunications amounted to $256.5 million during July-May. The outflows were $327.8 million in the corresponding period last year. Energy firms repatriated $215.9 million, compared with $245 million in the same period last year.

The squeeze in profit repatriation on foreign investment helped ease some of the pressures on the current account. Pakistan posted a current account deficit of $12.678 billion in July-May FY19, narrowing from a deficit of $17.926 billion a year earlier.

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