Islamabad, Pakistan – September 17, 2025 – The State Bank of Pakistan (SBP) has introduced a significant policy shift aimed at simplifying foreign investment regulations for Pakistan’s growing IT and software sector. Through EPD Circular Letter No. 09 of 2025, issued on September 11, 2025, the SBP amended Chapter 20, Para 13 of the Foreign Exchange (FE) Manual, creating a more enabling environment for IT companies looking to expand globally.
This move builds upon earlier reforms made in 2020–2021, which facilitated startup founders in establishing holding companies abroad. The latest changes, however, are targeted at export-oriented IT companies that want to set up subsidiaries in high-growth markets and strengthen their international footprint.
Key Highlights of the Policy Update
- New Sub-Categories for Equity Investment Abroad
Category A of “Equity Investment Abroad” has now been divided into two sub-categories:
- A1: Export-oriented IT companies.
- A2: Other exporters.
This restructuring formally recognizes the unique needs of the IT sector.
- A1: Export-oriented IT companies.
- General Permission for IT Companies (A1)
Export-focused IT firms can now establish subsidiaries or make equity investments abroad under a general permission regime, eliminating the need for prior SBP approval in most cases. This will significantly reduce procedural hurdles and delays. - Relaxed Remittance Rules
Previously, IT companies required SBP approval for designating Authorized Dealers when using specific funds, such as ESFCA (Exporters’ Special Foreign Currency Accounts). Under the new rules, A1 companies no longer need prior approval, streamlining remittance processes. - Facilitation for Smaller IT Firms
Even companies without sufficient export earnings can remit funds abroad up to the higher of their average net profit over the past three years or USD 100,000. This ensures smaller IT businesses are not excluded from expansion opportunities. - Annual Remittance Caps
Under general permission, companies can remit the higher of:
- 10% of their average export earnings (over the past three years), or
- USD 100,000.
This introduces a predictable framework for overseas expansion while ensuring compliance.
- 10% of their average export earnings (over the past three years), or
A Boost for Pakistan’s IT and Software Industry
Pakistan’s IT sector has been one of the country’s fastest-growing export segments, contributing over $3 billion annually to the economy. With demand for IT services booming in markets such as Saudi Arabia, the UAE, and North America, these reforms are expected to give Pakistani companies a stronger competitive edge.
Industry experts believe the policy update will provide much-needed clarity, flexibility, and investor confidence. It allows founders and companies to scale operations abroad without being hampered by regulatory red tape, while still ensuring compliance with SBP reporting and eligibility requirements.
Balancing Facilitation with Compliance
While the permissions have been broadened, experts caution that compliance remains essential. Companies must clearly determine whether they fall under A1 or A2 categories and work closely with their Authorized Dealers to ensure accurate reporting. Failure to comply could lead to regulatory scrutiny despite the relaxed framework.
Outlook
The SBP’s latest reforms reflect a forward-looking policy stance that prioritizes the digital economy as a key driver of growth. By reducing bottlenecks for IT exporters and encouraging international expansion, the central bank has aligned its regulatory framework with Pakistan’s broader ambitions of becoming a regional technology hub.
As the IT industry continues to mature, the simplification of foreign investment rules could prove transformative, unlocking new opportunities for software houses, fintechs, and IT service providers aiming to capture a share of global markets.
Follow the SPIN IDG WhatsApp Channel for updates across the Smart Pakistan Insights Network covering all of Pakistan’s technology ecosystem.
