KARACHI: Repatriation of profits and dividends on foreign investments increased further in the first seven months of this fiscal year.

The State Bank of Pakistan (SBP) reported on Tuesday that the foreign companies repatriated $1.090 billion during the July-January period as against $1.058bn in the corresponding period last year, a rise of over three per cent.

The inflow of foreign direct investment (FDI) also improved during the period to $1.161bn, but the outflow of dollars was higher by $71m.

The rising outflow of dollars in recent years is creating problems compelling the government to borrow short-term loans from the commercial market amid declining inflows. The country’s reserves have also dropped sharply in recent months.

The central bank data showed that the country’s overall foreign exchange reserves had plunged by $2.1bn since October 2016 mainly due to higher debt servicing on foreign loans.

The government could not arrest the increasing trade deficit while it failed to boost exports resulting into lower inflows of foreign exchange.

However, analysts and researchers observed that the game-changer $57bn China-Pakistan Economic Corridor (CPEC) project could not attract foreign investment so far and even inflows from China were not that encouraging.

There was no major change in the FDI trend except an investment of $400m by a Netherlands company to buy Engro Foods in the end of 2016.

On Feb 24, the State Bank imposed 100 per cent cash margin on imports of a number of items including motor vehicles, both CKDs (Complete Knock Down) and CBUs (Completely Build Units), mobile phones, cigarettes, jewellery, cosmetics, personal care, electrical and home appliances, arms and ammunitions etc, to reduce the import bill.

This move could also help the foreign exchange reserves to remain at a satisfactory level above $20bn.

Published in Dawn, March 1st, 2017