KARACHI: The repatriation of profits and dividends surpassed the foreign direct investment (FDI) inflows during the first four months of this fiscal year.
The payments on the FDI stood at $532.7 million during July-Oct 2015-16 as compared to the inflows of $350.8m, the State Bank of Pakistan (SBP) reported on Thursday.
The situation was reverse in the corresponding period last year when FDI inflows stood at $462.5m and payments at $344.8m.
The steep fall in FDI during the last three years was alarming for the economy, and the steady rising FDI outflow is making the situation even worse.
Foreign portfolio investment payment is also taking an ugly shape, as it jumped to $135m during the period under review, while it was just $60m in the same period last year.
Total payments on FDI and portfolio investments were $667m in July-Oct 2015-16 as compared to $405m in the same period last year.
Experts believed that foreign investors were not ready to retain profits and dividends in the country. They are sending out the entire amount while the inflows are ignorable.
The situation has further aggravated by large current-account deficit in October, 2015, putting pressure on the external front of the country.
The deficit in October was $416m mainly due to increasing trade deficit, debt servicing and outflows of profits and dividends. However, the four-month (July-Oct 2015-16) deficit was $532m much lower than $1.897 billion in the same period last year.
The deficit trend could prevail since the exports are not going up. The country’s current-account remained in the red despite low trade deficit on the back of low oil prices.
Many experts fear that oil prices could jump in the wake of deteriorating political situation of Middle-East.
If crude price goes up, Pakistan would face extreme difficulty in meeting the import bill, which may compel the country to borrow more from international creditors.
Another worrying aspect is the Chinese component in FDI, which was 90 per cent during the period under review, showing that the country had been vacated by foreign investors other than China.