PAKISTAN’S IT EXPORTS REACH RECORD HIGH

27 May 2024

Aiman Khattak

In a significant development, Pakistan’s IT exports have shown a promising recovery over the past five months of the current fiscal year (FY24). According to the latest data from the State Bank of Pakistan (SBP), total IT exports for the first nine months of FY24 have nearly reached $2.6 billion, matching the level of IT exports for the entire FY23. This positive trend in IT exports highlights the strength of Pakistan’s technology industry and suggests a favorable outlook for future growth.

This robust growth trend is further reflected in the year-on-year comparison, where SBP’s data shows that during the first ten months of ‘Fiscal Year-24’, IT exports were up by an impressive 21 percent. This upward trajectory is also evident in net IT exports (IT exports minus imports), which jumped by 20 percent year-on-year.

To begin with, this recovery began in October 2023, with IT exports, including telecommunications, growing consecutively on a monthly basis. In December 2023, IT exports reached a new high, recording $303 million – the highest ever monthly exports for Pakistan. While the momentum slowed slightly in January and February 2024, with exports slipping to $265 million and $257 million, respectively, the year-on-year growth remained strong, surging by 32 percent in February.

Moreover, the upward trend continued in March and April 2024, with IT exports touching new record highs. In March, the sector reached the highest ever monthly tally, only to be surpassed in April, when IT exports reached $310 million – the new all-time high for Pakistan.

Commenting on the IT sector performance, an analyst at Arif Habib Limited noted that IT exports are expected to close the current fiscal year (FY24) in the range of $3.1-3.2 billion, falling short of the government’s ambitious $3.5 billion target. Nevertheless, this would still represent a significant improvement from the $2.6 billion in IT export remittances received in FY23.

Similarly, the rise in IT exports has also been reflected in the sector’s growing contribution to Pakistan’s overall goods and services exports. The share of IT exports in total exports has increased from 4 percent in FY19 to almost 8 percent in FY24 so far.

Segment-wise, the year-on-year growth during the first ten months of FY24 was primarily driven by the Computer Services sector, which accounts for an impressive 80 percent of the total IT export proceeds. The Telecom sector also contributed to the overall growth.

Analysts attribute the recovery in IT exports to several factors, including the government’s strategic initiatives, the industry’s increased focus on export-oriented services, and the global demand for Pakistan’s IT talent.

One of the key government initiatives was the establishment of the National IT Board (NITB) in 2022, which has been instrumental in facilitating the growth of the IT sector. The NITB has implemented various programs to support IT companies, such as streamlining the regulatory environment, providing tax incentives, and improving infrastructure.

Additionally, the government’s push to upskill the country’s tech workforce has paid dividends, with Pakistan’s IT professionals increasingly sought after in the global market. The country’s cost-competitive labor force and the availability of specialized talent in areas like software development, cybersecurity, and data analytics have been crucial factors in driving the sector’s growth.

The industry’s own efforts to diversify its export portfolio and expand into new markets have also contributed to the recent surge in IT exports. Pakistani IT companies have been actively targeting emerging markets in the Middle East, Africa, and Southeast Asia, alongside their traditional markets in Europe and North America.

The government’s ambitious goal of reaching $25 billion in IT exports by 2029 remains a significant challenge, as it would require a more than eight-fold increase from the $2.6 billion recorded in FY23. However, the recent upward trend in IT exports provides a glimmer of hope that the sector is moving in the right direction.

Commenting on the government’s target, an industry expert stated, “Achieving the $25 billion IT export target by 2029 will require a concerted effort on multiple fronts. While the recent recovery is encouraging, the government and the industry must work together to address the underlying challenges and create an environment that fosters consistent and sustainable growth in the IT sector.”

These challenges include improving the country’s digital infrastructure, enhancing access to global markets, addressing skill gaps, and creating a more favorable regulatory environment for IT businesses. If these issues are addressed effectively, Pakistan’s IT sector has the potential to become a significant contributor to the country’s economic growth and diversification.