Outflow of profits and dividends on foreign investments increased

State Bank of Pakistan reported on October 26 that the outflow of profits and dividends on foreign investments from the country increased more than 25 per cent in the first quarter of 2017-18.

Foreign investors cumulatively repatriated some $ 426.8 million on account of profit and dividend during July-Sep of FY18 against $ 334.6 million in July-Sep of FY17, depicting an increase of $ 92.2 million. Major outflow of profit and dividend was witnessed on account of Foreign Direct Investment (FDI) and cumulatively some 90 percent of the repatriated amount has been sent as returns on FDI.

During the period under review, repatriation from FDI rose by 26 percent. Foreign investors sent abroad $ 385.6 million on account of returns on FDI during the first quarter of the current fiscal year compared to $ 306.9 million in the corresponding period of last fiscal year, showing an increase of $ 78.9 million. During the period under review, Pakistan fetched FDI amounting to $ 662 million.

Repatriation of profit and dividend from portfolio investment increased by 49 percent or $13.6 million to stand at $ 41.2 million in July-Sep of FY18 up from $ 27.6 million in the same period of last fiscal year.

The power sector witnessed an outflow of $48.8m, second highest in the quarter. It received $268.2m in FDI, which was the highest amount any sector attracted from overseas investors during the same quarter. This was due to the China-Pakistan Economic Corridor as most investments are in the power sector.

The significant jump in FDI during the first quarter was mainly due to Chinese investments, which constituted about 65pc of total inflows over the three-month period. With $123.8m, construction emerged as the second biggest destination for foreign investments in the quarter. Yet the outflow in the form of profits and dividends from the sector remained zero over the same period. The petroleum refinery sector received FDI of $0.6m in the first quarter while the outflow from the sector was $47.3m, indicating it is not attracting fresh investments.

Another major outflow was witnessed in the food sector with the repatriation of $39.5m in the first quarter. It attracted just $2m in FDI in the same period. Telecommunication received $64.8 in FDI in the first quarter while the outflow of profits and dividends from it was $40.2m.

Total foreign investments, including the foreign portfolio investment (FPI) of $41.2m, amounted to $426.8m during the first quarter, up 27.5pc year-on-year. FPI was $27.6m in the first quarter of 2016-17.