KARACHI: Repatriation of profits on foreign investments rose to $802 million during the first five months (July to November) of this fiscal year, indicating that the half-year repayment will easily cross $1 billion, according to data released by the State Bank of Pakistan (SBP).

What is more concerning for Pakistan is the inflow of net foreign direct investment (FDI), which stood at $640m during the period.

Outflows as dividends and profits have been increasing each year while FDI has been in decline, making things worse for a country already overloaded with foreign debts.

Payments on foreign private investments (FPI), which were $1.061bn in FY12, jumped to $1.221bn in FY14 and then to $1.632bn in FY15.

And if the pace of outflows remains the same during the seven months from December to June, the outflow could surpass $2bn during this fiscal year.

The economic team of the government, which has failed to attract foreign investors, is now trying to convince the nation that Chinese investments will bring about a revolution and that no other foreign investment is required.

However, the Chinese investments are extremely slow since the two countries signed agreements for investment of $46bn under the China-Pakistan Economic Corridor. Moreover, government officials have now made it clear that most of the $46bn would be comprised of loans to Pakistan.

The details of the State Bank’s report showed that for the first time coal has attracted foreign investments. During July-November 2015, the power sector attracted $273m as FDI, with coal power dominating with a share of $211m. The amount was significantly higher than $59m coal attracted during the same period of preceding fiscal year.

Pakistan has been making effort for last several years to use its coal reserves but the investors did not show interest except the Chinese ones. For the first time Pakistan is expected to generate electricity through coal reserves.

For the power sector, payments on FDI were $113m during July-November. The country expects to receive up to $2.5bn for the coal power projects that will certainly increase the outflow from this sector as profits.

Extreme imbalance was visible in the inflow and outflow of the financial business. During the five-month period under review, the net inflow in the financial business (banks) as FDI was just $5m while repayment on FDI for this sector was $121m which was the highest repayments among all sectors.

Pakistani banking industry has large foreign investments from the Middle East which is reflected through the outflow of profits and dividends from this sector.

Being poorest among all in the region regarding FDI, Pakistan needs to improve its performance to attract foreign investors, otherwise the country will continue to sink in the debts and debts servicing which could be more than $7bn in FY16.

Published in Dawn, January 3rd, 2016