KARACHI: The total profits and dividend outflows increased to $1.6 billion during the 11 months of the current fiscal year (11MFY22), reflecting that foreign investment in Pakistan yields good profits despite political and economic uncertainties.

The latest data issued by the State Bank of Pakistan (SBP) on Monday shows the high economic growth of about 5.87 per cent in FY22 (estimated) provided good profits to foreign investors. Last year, during the same period, the total profit outflow was $1.496bn. It also indicated a good profit due to higher economic growth of 5.6pc in FY21.

Foreign direct investment inflows into the country totalled $1.6 billion in FY22, a 5pc decrease from the previous fiscal year. The profit outflow was the same at $1.6bn in the same period.

The details further sho­w­ed that profits and dividends only on foreign direct investment (FDI) during July-May FY22 were $1,447.2 million as against $1,382m in the same period of last year.

The highest outflow during this period was from financial businesses (banks), which was around $269.3m, but was lower than last year’s outflow of $318m. Banks have been making huge profits for the last several years, which attracted the new government’s attention for a tax increase along with the super tax.

However, the biggest cha­n­ge was noted in the power sector since the profit outflow jumped to $199m during this period compared to $45.2m in the same period of last year.

The real profit maker was the thermal power sector, which remitted $187.8m out of the country during this period compared to just $30.9m. It seems that the increased price of electricity would yield more profits next year, which begins on July 1. Electricity prices have doubled during FY22, while more price hikes are expected by FY23, primarily due to higher oil and gas prices in the international market. However, the impact of rising oil and gas prices on electricity prices is far greater.

The outflow of profits from communication, mostly dominated by telecommunication, was almost the same as the previous year. The profit outflow during 11MFY22 was $185m.

The food sector, which has been providing good profits on foreign investment, yielded fewer profits this year compared to last year, but the amount is still significant. The food sector’s profit outflow was $152.7m versus $230.6m in the same period of last year.

The outflow from oil and gas exploration increased to $146.2m compared to $108.2m last year. Profits from the chemical sector imp­r­oved to $116m compared to 110.7m last year.

However, the profit outflow from the transport sector dropped to $95.1m compared to $131.6m last year. The outflow from tobacco and cigarette sectors also declined to $79.3m compared to $123m last year.

Published in Dawn, June 28th, 2022