The State Bank of Pakistan (SBP) has recently announced an extension to the deadline for IT companies and freelancers to credit 35 percent of their export proceeds into special foreign currency accounts. This move aims to further encourage the inflow of foreign exchange earnings into the country. In this article, we will delve into the details of this development and explore the implications it holds for the IT industry in Pakistan.
Extension of Deadline for Credit of Export Proceeds
The SBP’s decision to extend the deadline comes as part of its efforts to promote the growth of the IT sector in Pakistan. Earlier this year, in January, the central bank had advised Authorized Dealers (ADs) to mandatorily credit 35 percent of the export proceeds into special foreign currency accounts held by IT companies and freelancers. This directive was intended to incentivize these entities to bring their foreign exchange earnings back into the country.
Encouraging Inflow of Foreign Exchange
Under the guidelines set by the central bank, IT companies and freelancers must be registered with either the Pakistan Software Export Board (PSEB) or the Pakistan Software Houses Association (P@SHA). Moreover, these entities must be actively engaged in the export of software, Information Technology (IT) services, and IT Enabled Services (ITeS).
To facilitate compliance with this directive, the SBP also advised ADs to assist exporters in opening special foreign currency accounts and enable them to carry out remittance transactions from their Exporters’ Special FCY retention accounts. This was to be done through the issuance of corporate debit cards and the provision of digital platforms, including an FX digital portal. The SBP emphasized the importance of conducting due diligence and establishing a mechanism for ongoing monitoring of permissible payments abroad to meet the business requirements of these exporters.
Extended Validity Period
Initially, the instructions were set to be valid until March 31, 2023. However, the SBP has now extended the deadline to June 30, 2024, as communicated through the EPD Circular Letter No. 09 of 2023. This extension grants IT companies and freelancers additional time to comply with the mandatory credit requirement, encouraging a more seamless transition and ensuring the continued growth of the IT sector.
Implications for the IT Industry in Pakistan
The extension of the deadline has significant implications for the IT industry in Pakistan. By allowing IT companies and freelancers to credit 35 percent of their export proceeds into special foreign currency accounts, the SBP aims to boost the inflow of foreign exchange into the country. This move will contribute to strengthening Pakistan’s foreign reserves, promoting economic stability, and supporting the growth of the IT sector.
Furthermore, the directive encourages IT entities to register with the PSEB or P@SHA, emphasizing the importance of regulatory compliance and fostering a transparent and accountable business environment. By engaging in exports and adhering to the SBP’s guidelines, IT companies and freelancers can not only benefit from the extended deadline but also enhance their credibility and expand their market reach.
The State Bank of Pakistan’s decision to extend the deadline for the mandatory credit of export proceeds into special foreign currency accounts is a positive development for the IT industry in the country. By incentivizing IT companies and freelancers to bring their foreign exchange earnings back home, the SBP is fostering economic growth and stability. This extension provides ample time for businesses to comply with the mandatory credit requirement and contribute to the development of the IT sector in Pakistan. As the deadline now stands at June 30, 2024, IT entities should seize this opportunity to maximize their potential and actively participate in the country’s growing digital economy.