Karachi: The returns on investment in Pakistan’s financial sector continue to be highly lucrative despite anaemic GDP growth rate for the last five years.
The State Bank’s latest report showed that $327 million was paid in profit/dividend during the first 11 months (July-May) of this fiscal year on the investment in financial businesses, mostly banks, while foreign direct investment (FDI) in this sector during the same period was just $142 million.
The report also revealed that the repatriated amount on foreign investment is rising each year. The total amount repatriated during the period was $1.157 billion against net FDI of $1.36 billion. The country has significantly improved its foreign exchange reserves with the help of borrowing from multilateral sources, aid and selling of Eurobonds, but the foreign investment has yet to pick up.
According to the SBP report, the highest amount repatriated during the period was from financial sector $327 million, followed by power sector $143 million, oil and gas exploration ($98 million) and food ($93 million). The telecom sector showed drastic change, receiving second-highest FDI of $396 million during the period compared to the disinvestment of $386 million a year earlier. The repatriated amount from this sector was $39 million against last year’s $12 million. The oil and gas exploration received the highest FDI of $425 million during this period while it repatriated $98 million. Last year, the sector received $500.3 million while repatriated amount was $38 million.
The report showed that a number of firms received much less investment during the first 11 months of this fiscal year, but the amount repatriated as dividend and profits was much higher. The food sector received $7.5 million investment but repatriated amount was $93.8 million. Similarly, refining showed a net disinvestment of $16 million but the repatriated amount was $69 million. Petrochemicals received $1.2 million but repatriated $18 million, pharma received $9.8 million but repatriated $35.5 million, cement received $18 million but repatriated $39 million and the power sector received $33.5 million but repatriated $143 million.
The overall scenario is disappointing as it shows the firms have been receiving less while repatriating more on the basis on previous investments. Only two sectors, oil and gas exploration and communications, collectively received FDI worth $832 million, or 61 per cent, out of total $1.36 billion FDI in the period.