KARACHI: The outflow of profits and dividends on foreign investments shrank to a fifth of its last year’s value in the first nine months of the current fiscal year, the central bank data showed on Thursday.
The State Bank of Pakistan (SBP) reported that the outflow during July-March was $233 million compared to $1.27 billion a year ago — a drop of 81.6pc, or $1.034bn.
Since low foreign exchange reserves have been a major headache for the government, the financial sector believes that the outflow was deliberately curtailed to save the country’s foreign currency holdings.
This drastic slash in profit outflows has impacted foreign direct investment (FDI). During the first nine months of the current fiscal year, the inflows fell 22.6pc per cent to $1.048bn.
Pakistan attracts the lowest FDI in the region and inflows have been declining for the last three years, from $2.6bn in 2019-20 to $1.9bn in FY22.
Foreign investors are wary of the uncertain political and economic situation in Pakistan. Besides, they could not be attracted to invest in domestic bonds with 22pc returns on treasury bills. Sources said that not all sectors were in decline, but the outflow of profits was extremely limited.
The profits outflow from financial business (banks) during July-March was $18.5m against $189m in the same period last year.
Similarly, the food sector outflow fell to just $0.7m against an outflow of $126m in the same period last year. The profits in the food sector have not declined but the outflows were almost stopped.
The profit-making power sector presented the same situation, as it could hardly send out $34.8m in July-March compared to $178.4m a year ago.
The power tariff has been on the rise during this fiscal year, playing a major role in driving inflation up to 35.4pc in March. However, profits outflow was curtailed on a large scale.
The profits outflow was $9.9m against $108.2m a year ago in the communication sector, $15.2m versus $88.7m in the chemical sector, and $3.4m against $63.8m in the tobacco and cigarettes sector.
However, profits outflow from oil and gas exploration was significant at $87.5m compared to $109.5m last year. The mining and quarrying
sector presented a similar trend, with a $33m outflow compared to $26.6m last year.
Published in Dawn, April 28th, 2023
