“The oil and gas sector was the beneficiary of the rupee depreciation,” Next Capital Managing Director Muzammil Aslam said. PHOTO: FILE
KARACHI: The massive rupee depreciation brought down the repatriation of profits and dividends by foreign companies from Pakistan to their headquarters across the world to a four-month low at $138.2 million in July, the first month of the ongoing fiscal year 2019-20.
It stood almost flat at $136.7 million in the same month of previous year, the State Bank of Pakistan (SBP) reported on Tuesday.
“The repatriation in rupee terms remained comparatively higher, but shrank when converted into foreign currencies due to significant rupee depreciation against the US dollar,” Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General Abdul Aleem said while talking to The Express Tribune.
Authorities concerned let the rupee depreciate 32% to Rs160.05 against the US dollar in the previous fiscal year ended June 30, 2019. It slightly recovered Rs0.46 to Rs159.59 in July 2019, according to the central bank. The rupee depreciation straightaway impacted the repatriation of profits and dividends by 32% in rupee terms, Aleem said.
He, however, did not find the repatriated amount significant, saying “most of our members (foreign investors) did not repatriate profits and dividends, but opted to reinvest them in order to cope with tough economic conditions in Pakistan”. OICCI investors received a blow from the rupee depreciation, but they did not panic, he said. “We anticipate that structural reforms, particularly related to taxation, will settle down by December and we will see a turnaround in the economy and our businesses in the Jan-Mar 2020 quarter onwards.”
Car manufacturers, food and beverages emerged as the three sectors whose repatriation of profits and dividends dropped to a nominal amount or close to nothing. Car manufacturers, like Toyota, Honda and Suzuki, sent to their headquarters abroad only $0.2 million in profits and dividends in July 2019 compared to $20.3 million in July 2018.
The food sector repatriated nothing in July this year compared to $35.3 million in the same period of last year.
The beverages sector, comprising Coca Cola and Pepsi, repatriated $10.3 million in July 2019 compared to $35.3 million in the corresponding month of last year, according to the central bank.
Depreciation a boon for others
Although the rupee depreciation has badly shaken several businesses, at the same time it has benefited some other sectors. For instance, foreign oil and gas exploration firms and shipping lines were the beneficiaries of the rupee depreciation. Therefore, they managed to repatriate comparatively higher profits and dividends in July 2019.
“The oil and gas sector was the beneficiary of the rupee depreciation,” Next Capital Managing Director Muzammil Aslam said. Moreover, the shipping sector, which was counted in the transport sector, also remained unaffected by the rupee fall as it realised its earnings in dollars, he said. The transport sector repatriated $28.1 million in July 2019 compared to $6 million in the same month of last year, according to the central bank.
Chemical and financial sectors also managed to repatriate higher profits and dividends in the month under review.
“The chemical sector managed to repatriate comparatively higher profits and dividends after fertiliser manufacturers gave higher payouts in the recent past,” Aslam said. “Repatriation in the financial sector increased due to likely surge in foreign shareholding in related firms in Pakistan.” The chemical sector repatriated $24.3 million in July compared to $6.7 million in the same month of previous year. Financial businesses repatriated $26.9 million compared to $6.8 million last year.
Published in The Express Tribune, September 4th, 2019.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ