Profit outflows rise to $1bn

Published February 26, 2022

KARACHI: Foreign investors succeeded in earning over $1 billion as profits and dividends on their investments in Pakistan during the first seven months of the current fiscal year (7MFY22).

The data released by the State Bank of Pakistan (SBP) on Friday showed the country paid profits and dividend on foreign direct investment and portfolio were $1.013bn during July-Jan FY22.

Though foreign investors often shy away from investing in Pakistan, they have always earned good profits on their investments.

The amount of outflow was $1.025bn in 7MFY22, which is almost the same as during July-Jan FY21. This reflects that foreign investors have been earning profits without any hurdles in Pakistan despite the Covid-19 pandemic and other factors which have hit economies all over the world adversely.

The SBP data showed that the payments on FDI were $908m in 7MFY22 compared to $961m in the same period in FY21.

However, the outflow as profits on portfolio investment was higher with $105.5m compared to $63.9 in the same period in the previous fiscal year.

Foreign investors earned highest profits through investment in financial business (banks) which rose to $167.8m during 7MFY22 against $136.4m in the same period in last fiscal year.

Financial institutions — particularly banks — have been earning record profits during the last one-and-a-half year.

The yearly reports for 2021 appearing in the domestic media suggest that banks earned record profits this year that would resulted in to more outflows of profits and dividends on foreign investments.

The profits outflow from power sector was more than three times higher and reached $98.6 million during July-Jan FY22 against $30.5m in 7MFY21. Electricity prices saw an exorbitant increase during the period which is reflected from the profits. Most of the profits outflow — at 93m — was from thermal power.

The profits outflow from communications slightly decreased to $106m in 7MFY22 compared to $119.5m in the same period of last fiscal year.

The outflows from food sector were almost half of the previous fiscal year. The profits and dividends fell to $107.7m in 7MFY22 compared to the outflow of $220.9m of last fiscal year.

However, the outflow of $40m was noted from food packaging in 7MFY22 against zero outflows during the same period of last fiscal year.

The outflows from Chemicals and Tobacco & Cigarettes also fell to $62m and $60m in 7MFY22 compared to $93m and $84 during the same period in last fiscal year, respectively.

Despite stability in the profits outflows from Pakistan, foreign investors are reluctant to invest in the country. The present government is struggling to invite investment on tourism but so far no result is visible.

Published in Dawn, February 26th, 2022

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