SBP Unveils New Measures to Boost IT Export Growth
The State Bank of Pakistan (SBP) has announced several measures to boost the expansion of the IT sector abroad and enhance exports. These steps aim to support the government’s ambitious target of increasing IT exports to $25 billion by 2029, a significant rise from the estimated $3.2 billion in FY24.
According to an SBP circular, it has revised the foreign exchange manual to better support export-oriented companies, especially those in the IT sector. This revision will help these companies expand their international presence and increase Pakistan’s overall exports.
One of the notable changes is the SBP’s decision to increase the permissible retention limits in the Exporters’ Specialized Foreign Currency Accounts (ESFCAs). Previously set at 35%, SBP now raised these limits to 50%. This change will surely encourage IT exporters to repatriate a larger portion of their profits back to Pakistan, leveraging the stability of the rupee.
SBP Unveils New Measures to Boost IT Export Growth
Additionally, the SBP has introduced a new Equity Investment Abroad (EIA) category specifically for IT sector companies. This category allows export-oriented IT companies to acquire equity stakes in foreign entities. The amendment also removes the previous requirement for prior designation of banks for exporters utilizing funds for EIA from ESFCAs. This move simplifies the process and offers greater flexibility to IT exporters in managing their overseas investments.
Furthermore, the SBP has relaxed restrictions on establishing and acquiring entities abroad. Previously, IT companies were limited to establishing or acquiring only one entity per jurisdiction. This restriction has been eased, allowing IT companies greater freedom to expand their operations internationally.
These measures will significantly benefit IT export companies, particularly those thriving in the Gulf Cooperation Council (GCC) region, including Saudi Arabia. The combination of relaxed regulatory requirements and increased permissible retention limits is likely to bolster the confidence of IT exporters and encourage further growth in this sector.
The impact of these initiatives is already visible in the increasing share of IT exports in Pakistan’s total goods and services exports. In FY19, IT exports accounted for 4% of the total, and this figure has nearly doubled to almost 8% in FY24. This growth reflects the dynamic expansion of the IT sector and its critical role in the country’s export economy.
Overall, the SBP’s new facilities and regulatory changes will provide significant support to Pakistan’s IT sector, facilitating its global expansion and contributing to the government’s export targets. By easing the process for IT companies to invest abroad and repatriate profits, the SBP is creating a more favourable environment for the sector’s continued growth and success.
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