KARACHI: In a move to encourage exporters of IT&IT-enabled software and services to bring more dollars into the country, the State Bank of Pakistan (SBP) has allowed 35 percent of their profits to be retained outside the country. To achieve this objective, SBP has amended the Foreign Exchange Regulations and advised banks to mandatorily allow, till March 31, 2023, to maintain 35% of their export earnings in special foreign exchange accounts.
However, such exporters must be registered with either Pakistan Software Export Board (PSEB) or Pakistan Software Houses Association (P@SHA). These instructions will be reviewed in the light of gradual export performance from the IT sector and realization of export earnings during this period.
Exports of telecommunication, computer and information services collectively rose to $2.618 billion in 2022 from $2.108 billion in 2021. However, SBP’s move to curb dollar outflow has started to hit the industry as exports were almost flat at $1.087 billion in July-November FY23 compared to $1.051 billion in the same period last year.
“Exporters will be allowed to use their withheld funds for legitimate business payments or expenses abroad,” the SBP said in a circular issued on Friday.
The SBP has advised banks to provide digital channels for opening and operating these special foreign currency accounts. Banks can now facilitate outward remittances from retained earnings through the issuance of corporate debit cards after conducting the necessary due diligence.
“The amendments will incentivize new entrants in this sector to focus on exports and enable existing exporters to strengthen their operations, which in turn will create employment opportunities and increase the country’s foreign exchange earnings,” it said. SBP.
The data showed that Pakistan earned $633 million by exporting different IT services in the first quarter of the current financial year 2022-23.
According to the Pakistan Bureau of Statistics (PBS) exports of computer services grew by 5.21% to $516.4 million in July-September FY23 from $490 million in the same period last year.
Among IT services, exports of software consulting services increased by 5.73% from $176.5 million to $186.6 million, while exports of hardware consulting services also increased by 10.27% from $0.837 million to $0.923 million.
Exports of telecommunication services also saw a decline of 18.94% as they fell from $142.7 million to $115.7 million during the months under review.
Among telecommunication services, exports of call center services increased by 21.20% during the period as its exports increased from $44 million to $53 million while exports of other telecommunication services decreased by 36.85% from 89.7 million to $62.3 million during the period under review.
The SBP has advised banks to put in place a mechanism to facilitate and expeditiously resolve customer grievances. Banks were further advised to provide proper training to the relevant staff of all foreign exchange dealing branches to ensure facilitation of IT based exporters/ freelancers and to establish a permanent help desk to be supervised by two officers not below the grade of the vice president to act as a guide to the coordinators on behalf of the bank in resolving matters related to account opening, account retention, external remittances, etc.