According to data released by the State Bank of Pakistan on Tuesday, multinational companies (MNCs) have repatriated 90 percent more profits to their overseas headquarters in the first two months of FY2020-21, as compared to last year.
The repatriated profits for these two months amounted to $407.6 million, as compared to $214.7 million in the corresponding period of the fiscal year 2019/20. They dispatched the profit earned in different sectors of the economy and the Pakistan Stock Exchange (PSX).
Details show that foreign firms repatriated profit of $391.7 million on long-term foreign direct investments (FDIs) in different sectors like oil and gas exploration, communication, and power sectors. Furthermore, they sent a profit of $15.9 million against investments in shares at the local bourse. From the food sector, $99.1 million were repatriated, $90 million were sent against investment in the financial business, $65.7 million from the telecommunication sector, and $48.4 million from the tobacco and cigarettes sector during the first two months of the current financial year.
These firms repatriated a significant portion of the total profit to the United Kingdom, $197.8 million, followed by $57.8 million to the United States. Profits of $47.1 million were sent to Malta, $18.1 million to Switzerland and $17.5 million to Hong Kong.
Causes for this notable increase in repatriated earnings of foreign companies is attributed to the rise in corporate profitability, recovery in investor confidence after the economy reopened, and an increase in the processing of foreign currency remittances.
The economic activity started rebounding in June owing to the ease of coronavirus-related restrictions in the country. Businesses had reopened, while factories managed to resume production activities as well.
Analysts are of the opinion that this rise in repatriated earnings is a positive sign, as it shows that foreign investors were making money on their investment in Pakistan. They opined that this will also improve investor confidence in the country’s economy.
On the other hand, the SBP data also showed that the repatriated profits and dividends were higher than the amount of FDI fetched by the country in the period under review. FDI stood at $226.7 million in July-August FY2021, as compared to $162.0 million in July-August FY2020.