KARACHI, Oct 6: First two months of the new fiscal witnessed the much accelerated pace of reverse remittances in the form of profits and dividends which the companies in Pakistan are paying to their investors or shareholders living abroad.

The trend has started taking a solid shape for the last three years and is the direct outcome of privatisation of local entities bought by foreigners or new companies operating in Pakistan owned by the foreigners.

Official figures issued on Saturday showed that in the two months July-August 2007-08, reverse remittances reached $132.2 million compared to $88.6 million in the corresponding period last year.

The concern for policy-makers and the economic managers is the pattern of rising remittances abroad which has kept increasing. Only last year the total outflow of profits and dividends reached around $850 million.

During the last two months, the rising trend showed a growth of 49 per cent in the reverse remittances which could be alarming if the trend persists.

Analysts said the rising trend of reverse remittances would continue since more and more companies owned or having shares in the companies by the foreigners, have started paying dividends or profits.

Rising reverse remittances are threatening the balance of foreign accounts of the government already facing damaging uncontrolled rising trade and current account deficits.

If the total repatriation of remittances reaches higher than $1 billion by the end of this fiscal, it would be of serious problem for the country.

It would be an additional burden on the economy while the borrowing to meet the deficit would increase further.

The highest payment was made by the financial business (banks) to its foreign shareholders as a total 40.8 million were repatriated during the first two months of the current fiscal.

However, remittances by the telecommunications sector dropped to 32.3 million against $51 million repatriated during the corresponding period of last year.

A telecommunications expert said the reverse remittance from this sector would further rise in the next couple of months.

Power sector repatriated $12 million against $5.6 million, transport sector $9.1 million against nil payment and oil and gas exploration $7.7 million against $2.1 million during the first two months against the corresponding period of last year.

The country received foreign investment of over $7 billion last year which was widely welcomed by the government and the money was invested in several sectors.

However, the output of these investments would take time to show their results and finally it would add more to the reveres remittances and create serious threat for the government’s ability to make payment.

The government meets its current account deficits through this foreign investment, remittances being sent by the overseas Pakistani workers, privatisation proceeds and borrowings from the international market and donors.