ISLAMABAD: Confusion continued to prevail over the central bank’s alleged decision to withhold certain payments to foreign service providers and thus put the citizens at risk of losing access to certain paid apps and services come next month.

While the State Bank of Pakistan (SBP) has dismissed as “baseless and misleading” reports that it had withheld payments to Google, the telecom industry and other stakeholders said all was not well and there were at least some “unannounced restrictions” as the government seeks to limit dollar outflow.

In a statement issued on Wednesday, the central bank said: “The fact is that in order to facilitate the domestic entities, the SBP specified certain [IT-related] services, which such entities can acquire from abroad for their own use and make foreign exchange payments there against up to $100,000 per invoice.”

Such services include satellite transponders; international bandwidth, internet and private line services; software licences, maintenance and support; and service to use electronic media and databases.

Telecom companies, other IT-related players criticise State Bank’s ‘unrealistic’ stance, claim difficulties in foreign payments

The SBP said that entities that want to use this option should designate a bank, which is approved by the SBP one time. “Subsequently, after designation, such payments can be processed through the designated bank without any further regulatory approval,” it said.

However, the bank said it had found during recent off-site reviews that in addition to utilising the aforesaid mechanism to remit funds for IT-related services for their own use, telecom companies were remitting the bulk of the funds for video gaming, entertainment content, etc., purchased by their customers using airtime, under direct carrier billing (DCB).

DCB is an online mobile payment method which allows users to make purchases by charging payments directly to their mobile phone carrier bill instead of through a debit or credit card.

“The telcos were allowing their customers to purchase above-mentioned products through airtime and then remitting funds abroad reflecting such transactions as payments for acquisition of IT-related services,” it said.

“Thus, in effect the telcos were acting as intermediaries/payment aggregators by facilitating the acquisition of services by their subscribers. Therefore, in view of the violation of foreign exchange regulations, SBP revoked the designation of banks of telcos for such payments. However, to facilitate their legitimate IT-related payments, telcos have been advised through their banks to resubmit their requests,” it said.

It said that if any entity, including a telco, intended to operate as an intermediary or payment aggregator and such arrangement involved the outflow of foreign exchange, it had to approach the SBP, separately through its bank, to seek special permission to provide such services under the Foreign Exchange Regulation Act, 1947.

‘Tug of war’

The SBP’s statement comes after reports that the central bank had revoked the payment of $34 million to international service providers to limit dollar outflow and the subsequent tug of war between the IT sector and the State Bank.

As direct payments through mobile phone carriers will be unavailable to citizens in the coming days for buying some services, the industry has expressed serious concerns to the IT ministry.

Some reports suggested that the paid Google application and other services would not be available in Pakistan from Dec 1, though free Google applications and other free services would remain available.

Minister of IT and Telecom Syed Aminul Haque has also talked to Mr Dar over the phone and written a letter as well. In the letter, Mr Haque asked the finance minister to take immediate notice of the matter and direct the State Bank to continue the existing payment mechanism.

Before the SBP release, a senior telecom company official told Dawn apps could still be purchased apps via mobile credit, but it would be principally revoked by Dec 1.

Other stakeholders in the IT sector said payments through even banking channels were becoming difficult. They also criticised the SBP and FBR for being “unrealistic”.

Pakistan Software Houses Association chief Zohaib Khan said the SBP had imposed unannounced restrictions, alleging that it backed off from its commitments very often “like the FBR”.

Meanwhile, Punjab IT Minister Dr Arslan Khalid has also urged the SBP to revisit its decision “to revoke the payment of $34m to international service providers”.

Imran Gabol and Shahab Nafees also contributed to this report

Published in Dawn, November 27th, 2022

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