Will Cash Margins curtail imports at the cost of
digitisation? The current account deficit is in dire straits. But what are we willing to give up on for its sake?
By Ahtasam Ahmad
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hose at the helm of the country’s administration have newfound admiration for the telecommunication and the IT sector. In almost every address to the public on the revival of the economy, praises for the sector are part of the agenda and emphasizing on its potential is a recurring theme. Further, proactive policy making like in the case of Digital Pakistan Policy, Cloud First Policy and Draft Broadband Policy makes one believe that probably the government is willing to see this transition through. However, the ground reality is completely different. The Telecommunications sector has seen a chain of events starting from the government tracking back on its promise of reduced withholding tax to the latest implementation of 100 percent cash margin on equipment imports of the sector. The measure comes as an attempt to curb current account deficit through discouraging imports. However, it fails to distinguish between consumption based imports and equipment imports that are part of a collective effort to develop the country’s infrastructure, specially in the case of IT and Telecommunication sector.
Imposition of Cash Margin
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he State Bank of Pakistan (SBP) last month notified the imposition of a 100 percent cash margin on import of 177 items. The list of items also includes power equipment for telcos, lithium
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batteries, routers, main telecom equipment, telecom parts and servers. The cash margin requirement means that the importer of specified goods will have to deposit the total value of their goods with a commercial bank before opening a letter of credit. This is a tool widely employed to discourage imports and to ease up the downward pressure on currency. However, the targeted imports of such restrictions are usually non-essential and luxury ones. The latest margins requirements include automobile and textile imports alongwith the telecom equipment.
Problem for the Telcos
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s per a letter of Ministry of Information Technology and Telecommunication (MOITT) to the SBP, “The decision of SBP impacts 90% of the Telecom imported equipment that will have a severe impact on the liquidity situation as well as the funding requirement for the telcom business.” “Needless to mention that telecom
