As a result of the State Bank of Pakistan’s (SBP) embargo on letters of credit (LCs), there is a risk that internet service infrastructure like fiber optic cables and cell towers will be affected.
In response to the central bank’s ban on imports of essential equipment for the country’s broadband operators, many Internet service providers (ISPs) have penned urgent letters to the ministry of IT and telecommunication highlighting the issues faced by the operators as a result of the central bank’s ban.
In their letter to SBP, the ISPs stated that they had pending cases where our LCs were approved for millions of dollars. This LC is for our fiber broadband equipment that is critical to our operations and services across the country, without which our operations and services are bound to suffer severely”. In accordance with SBP’s email dated 27 September 2022, this amount already included in the sector’s monthly import quota of $330,000 per month with a carry forward option of up to September 2023.
The above letters of credit are valid until March 2023, and payments will be made from December 2022 to March 2023 as per the terms of each letter of credit. According to them, we are well within the quota limit as we have been allocated millions of dollars in quota for the period September 2022 to March 2023, meaning that our imports will be well within our quota limit. In addition, they warned that without the timely approval of the aforesaid LCs, broadband deployment and operations throughout the country would suffer greatly from similar problems, as other operators are also facing a similar problem.
As a result of further delays in allocating the already agreed-upon quota (reduced by 50% of last year’s imports), it is highly likely that national broadband services will be disrupted and major outages will occur, which will have catastrophic consequences for the country’s fragile national economy.
There is a request from the ISPs for the IT ministry to immediately intervene, as per the directives of the Prime Minister’s Office’s letter dated 15 October 2022, so that the above-mentioned licences are approved at the earliest possible time.
The telecom sector has faced a plethora of neck-breaking issues in the aftermath of the devastating floods. Imports of goods specific to the sector worth $200 million are still awaiting approval from the SBP as a result of the floods. In this regard, the government has already mandated that the central bank should be able to clear 50 percent of imports in accordance with the priority list sent by operators, but progress has remained limited to date.
The telecom players have requested the government to reconsider the import quota assigned by SBP to them on October 4th, as this quota was lower than the one required due to a backlog that had occurred in the past. As a whole, the industry as a whole has been experiencing issues as it relates to the implementation of the import quota, with some LCs having expired due to delays in the approval process by the SBP and some operators defaulting on payments because of these delays.
As part of its commitment to provide maximum facilitation at the time, the State Bank at the time did so by offering assurances to extend the maximum amount of facilitation through the monthly import quota, carrying forward options if the limit was not fully utilised, as well as other facilities.
There is a great deal of urgency expressed by the ISPs, which shows that SBP has yet to honor these commitments, and any further delays could seriously damage the broadband operations and negatively impact businesses. This is just the beginning of a series of Internet shutdowns that will result in a blackout on the free flow of information throughout the world.