Broadband services in the country are likely to suffer as a result of the State Bank of Pakistan’s (SBP) embargo on letters of credit (LCs), which threatens to demolish internet infrastructure such as cell phone towers and fiber optic cables.
Internet service providers (ISPs) wrote urgent letters to the Ministry of IT and Telecommunication outlining the difficulties faced by broadband operators in the country as a result of the central bank’s ban on imports of critical equipment.
The ISPs wrote,” Several cases of our LCs approval for millions of dollars are pending with SBP. These LCs are for our critical fiber broadband equipment without which our operations and services across the country are bound to suffer badly”.
The amount is part of the $330,000 monthly import quota already allocated to the sector via SBP’s email on September 27, 2022, with a carry forward option. The LCs listed above is valid until March 2023, and payments will be made between December 2022 and March 2023.
They explained that their allocated quota from September 2022 to March 2023 is in the millions of dollars, so their imports are well within the quota limit.
They also warned that if the aforementioned LCs are not approved on time, broadband operations and deployment across the country will suffer greatly, as other operators are also experiencing similar issues.
Any further delay in allocating the already agreed-upon quota (which has been reduced by half of last year’s actual imports) would undoubtedly result in disruption of national broadband services and major outages, with disastrous consequences for the country’s fragile national economy and productivity.
The ISPs urged the IT ministry to intervene immediately in accordance with the Prime Minister’s Office’s letter dated 15 October 2022, so that the aforementioned LCs could be approved as soon as possible.
In the aftermath of the devastating floods, the telecom sector has faced a slew of headaches, with $200 million in sector-specific imports still awaiting SBP approval. Relevantly, the government has already directed the central bank to clear 50 percent of imports in accordance with the priority list conveyed by operators, but progress has been slow.
On October 4th, telecom companies requested that the government reconsider the import quota assigned by SBP because it was less than what was required due to a prior backlog.
They also stated that the industry as a whole was experiencing difficulties with the implementation of the import quota, with LC terms expiring due to SBP delays and some operators defaulting on payments as a result of these delays in the approval process.
The State Bank at the time promised maximum facilitation in the form of monthly import quotas, a carry forward option if the limit was not fully exhausted, and other facilities.
The ISPs’ level of urgency indicates that SBP has yet to honour these commitments, and any further delays could severely harm broadband operations and negatively impact businesses. Internet shutdowns and the resulting blackout on information flow would only be the beginning.
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