Karachi, October 23, 2023 – In a significant move aimed at boosting the country’s information technology sector, Pakistan announced the removal of restrictions on foreign payments made by the IT industry.
The State Bank of Pakistan (SBP) issued a notification on Monday to allow unimpeded payments to foreign partners by the information technology sector.
The SBP’s notification specifically addressed several chapters within the Foreign Exchange (FE) Manual, namely Para 12, Para 36, and Para 40 of Chapter 12 (Exports), which contain general guidelines related to the ‘Export of Software,’ ‘Export of Services,’ and the ‘Utilization of funds held in Exporters’ Special Foreign Currency Account (ESFCA).’
This decision is seen as a strategic effort to incentivize and empower software exporters, Information Technology (IT) firms, IT-enabled services (ITeS), and freelance service providers to enhance their export revenues and contribute more foreign exchange to Pakistan’s economy. To facilitate this, the retention limit in ESFCAs has been raised from 35% to 50% of the export proceeds, and the utilization of these retained funds has been made more flexible.
The SBP’s statement emphasized, “Going forward, such exporters can freely make payments abroad of current account nature from these accounts, without prior approval of SBP.” This policy change is expected to streamline the process and encourage IT companies to expand their global footprint and strengthen foreign partnerships.
As part of this reform, Paras 12 and 36 of Chapter 12 (Exports) have been amended. Moreover, Para 40 of Chapter 12 of the Foreign Exchange Manual will no longer apply to the exports mentioned above. This signifies a significant departure from the previous regulatory framework and a significant step forward for Pakistan’s IT sector.
The country’s banking institutions have been directed to promptly communicate these instructions to all their constituents and ensure meticulous adherence to the new guidelines. This move is anticipated to not only boost Pakistan’s IT exports but also attract foreign investment, foster innovation, and stimulate economic growth.
The decision to relax restrictions on foreign payments in the IT sector comes at a time when Pakistan is actively seeking to position itself as a global technology hub. By encouraging greater flexibility in international transactions, the government aims to create an environment conducive to innovation, investment, and the expansion of the IT industry’s global reach.
This announcement has been met with positive responses from various stakeholders in the IT and software development sector. Industry experts believe that it will pave the way for more significant opportunities for Pakistani IT companies to engage in international collaborations, expand their service offerings, and contribute substantially to the nation’s economic prosperity.
As Pakistan takes steps to foster the growth of its IT industry, it will be interesting to monitor the impact of this policy change on the nation’s software exports and its broader technology landscape. It demonstrates a commitment to embracing the digital age and positioning Pakistan as a competitive player in the global technology arena.
