Dollar outflows intensify

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Forex Research - Daily US Dollar Report

Repatriation of US dollars through multiple channels has worsened the already challenging situation in the face of repayment deadlines over the next few months while the country’s reserves deplete.

The latest report of the State Bank showed that the outflow as payments on foreign direct investments were reaching closer to entire inflow of the foreign direct investment (FDI) at the end of 3rd quarter of this fiscal year.

The outflow as repayments to IMF was over $1 billion during the first nine months of 2012-13 and now the repatriation of dollars as payments on FDI and disinvestments aggravated the situation.

At the end of the 3rd quarter the payments on FDI were $529 million while the total FDI inflows during the same period were $621m. At the same time, the collective outflow as payments on FDI and portfolio investment rose to $637m.

The report showed that the disinvestment from the telecommunication during this period was $335m. Telecommunication has been a hot sector for the foreign investment but it has lost attraction, even last year the disinvestment from this sector was $309m.The oil and gas exploration did not lose its position and succeeded to receive $426m during this period, though it was less than last year’s $441m. The outflow as payment on this sector was $29m.

The power sector also succeeded to come out from the disinvestment it witnessed last year. This year the FDI for the sector rose to $40.5m in July-March period of this fiscal year against a disinvestment of $13m.

Few sectors noted a jump in the FDI during this period which included food, financial business and transport. The biggest change was noted in the financial business which noted an inflow of $225m compared to just $45m inflow during the corresponding period of last year.

The food sector which had received just $2.5m during this period of last year, received $41m during the current year. However, the payments on FDI for this sector were $24m.

The transport sector also witnessed a jump as the FDI this year rose to $56m while last year it was $16m.

The detail shows that the highest repatriation of dollars was noted in the financial business. During this period $152m repatriated from this sector as payments on FDI.

The chemical sector witnessed the second biggest disinvestment after telecommunication. The total disinvestment during the nine months were $73m while during the same period of last year, the sector received FDI worth $66m.

The payments on FDI (repatriation) was second highest in the petroleum refining sector as it noted an outflow of $68m while it received $13m as FDI during the same period.

Pakistan would pay $850m to IMF next month and more in next three months that will sharply cut the already low reserves of the State Bank. The caretaker government has hinted that IMF was willing to extend loans on higher interest for Pakistan’s current account imbalances and make the country able to continue repayments to IMF.

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