Profits outflow down by 17pc in 1QFY22

Published October 27, 2021
An employee counts US dollar bills at a money exchange. — Reuters/File
An employee counts US dollar bills at a money exchange. — Reuters/File

KARACHI: The outflow of profits and dividends from the country declined by over 17 per cent during the first quarter of FY22, reflecting low investment made by foreign companies.

Data released by the State Bank of Pakistan on Tuesday showed that foreign investment could not yield the profits as much as the previous year. The total outflow of profits and dividends during July-Sept FY22 was $477.7 million compared to $576.8m in the same quarter of last year, showing a decline of 17.2pc, or $99.1m.

Pakistan has been receiving the lowest foreign direct investment (FDI) in the region (excluding Afghanistan) and most of the investment came from European countries, the United States and China.

The FDI from China declined by 50pc in the first quarter of this year compared to the same period of the last financial year. The FDI from the US exceeded that of China as it jumped to $100.9m during July-Sept FY22 compared to $19.7m in the same period of last year.

Pakistan receives lowest foreign direct investment in the region

However, it is important to note that despite the devastating impact of the Covid-19 pandemic, foreign investment in the country earned higher profits in FY21.

The profit on investment from the United Kingdom declined by more than 51pc during the first quarter of FY22 but it was still highest among other foreign investments.

The profit outflow to the UK was $115.8m in the first quarter of FY22 against an outflow of $239m in the same period of FY21. The UK is one of the biggest foreign investors in Pakistan. The FDI in first quarter of FY22 from the UK was 30m against $31m made in the same period of last financial year.

The profit outflow to the US went slightly up as it was the second highest outflow to that country. The profit repatriated to the US during the first quarter was $93m compared to $89m in the same period of the last fiscal year. The FDI from the US was the highest in the same quarter with $100.9m.

The profit outflow to China improved but it is still much lower than the several countries. The country received a total profit of $39.4m during the first quarter compared to $20.4m in the same period of the last fiscal year.

The profit outflow was $48.7m to the Netherland, $42.8m to Switzerland, $30.4m to France and $27m to Malaysia.

Despite record inflow of remittances and 27pc growth in exports during the current fiscal year, the foreign investors did not prefer Pakistan for higher investment.

The country is negotiating with the International Monetary Fund in Washington for loans that may open windows to get more financing from other sources. The media reports indicate that negotiations with the IMF have turned hard.

Analysts keenly watching the situation are of the opinion that failure of talks to could damage foreign investment in the country; even delay could cause harm to the external account of the economy.

Published in Dawn, October 27th, 2021

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