Profit outflow dips 30pc in 10 months

Updated May 31, 2019

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Outflow of profits and dividends from the country declined by 30 per cent in the first 10 months of the current fiscal year, according to latest data released by the State Bank of Pakistan (SBP) on Thursday. — Reuters/File
Outflow of profits and dividends from the country declined by 30 per cent in the first 10 months of the current fiscal year, according to latest data released by the State Bank of Pakistan (SBP) on Thursday. — Reuters/File

KARACHI: Outflow of profits and dividends from the country declined by 30 per cent in the first 10 months of the current fiscal year, according to latest data released by the State Bank of Pakistan (SBP) on Thursday.

During the same period, however, rupee’s value also declined by 21.36pc against the greenback amid rising debt financing costs.

Outflow of profits earned by foreign companies operating in the country fell by 30.2pc to $1.237 billion compared to $1.773bn in the same period last year.

In addition to this, the foreign direct investment in the country also halved to $1.376bn compared to $2.849bn.

According to analysts, the declining FDI, low profitability of the companies and reinvestment are of the reasons which can explain the drop in profit outflow during the period under review.

The SBP data showed the highest outflow of profits was registered in the oil and gas exploration sector at $215.9 million against $220m last year.

The sector emerged as one of the largest recipients of foreign investment after power sector during the 10 months under review.

Power sector, on the other hand, witnessed an outflow of $103m during the period under review compared to $189.7m in the same period last year. However, heavy foreign investment in the sector during the last three years could result in larger outflows in the next few years.

The second largest outflow was recorded in the financial business (banking) sector at $202m compared to $244m during the same period last year. The sector’s profitability was relatively low mainly due to lack of investment opportunities as the government is unwilling to raise money for longer tenures.

The government has relied heavily on the central bank to fulfil its borrowing needs and has retired the debts owed to the commercial banks.

Moreover, profit outflow from telecommunication sector also dropped to $101.6m from $166.8m compared to the same period last year.

Outflow from food sector fell by 56pc to $86.3m compared to $198m in the same period last year. The sector has attracted significant foreign investment whereas declining outflows show the overall dip in economic activity in the country.

On the other hand, chemicals and transport sector noted an outflow of $91m and $86m respectively, relatively unchanged from last year.

The poor economic growth has also affected foreign portfolio investment in the country which declined by 199pc during the 10 months of the current fiscal year.

Published in Dawn, May 31st, 2019