Pakistan achieves a significant milestone in the Information Technology (IT) sector, witnessing a record high in IT exports in December 2023, reaching an impressive $303 million. Analysts at Topline Securities Limited report a remarkable 17% Month-on-Month (MoM) increase and a substantial 23% Year-on-Year (YoY) growth, surpassing the last 12-month average of $222 million. This signals robust performance by the IT industry.
Factors Driving IT Export Surge
Two key factors are attributed to the surge in IT exports. Firstly, the State Bank of Pakistan (SBP) raised the permissible retention limit from 35% to 50% in the Exporters’ Specialized Foreign Currency Accounts, providing more flexibility to technology companies. Secondly, the stability of the Pakistani Rupee (PKR) incentivized IT firms to repatriate their foreign income and deposit it in local accounts.
Positive Trend in Foreign Earnings Repatriation
The reported IT export figures represent the amount remitted back to Pakistan by technology companies. The increase in IT exports for December 2023 reflects a positive trend in bringing foreign earnings back into the country, according to the Minister of IT.
Strong First Half Performance in FY 2023-24
In the first half (July – December) of fiscal year 2023-24, IT exports amounted to $1.5 billion, marking a 9% YoY increase compared to the same period in the previous year when exports were recorded at $1.3 billion.
Noteworthy Increase in Net IT Exports
Net IT exports, calculated as Exports minus Imports, also experienced a noteworthy increase, growing by 16% MoM and 13% YoY to reach $263 million in December 2023. In the first half of fiscal year 2023-24, net IT exports recorded a growth of 7% YoY, amounting to $1.3 billion.
Optimism Surrounding Pakistan Startup Fund
The government’s recent initiative, the Pakistan Startup Fund, committing an annual investment of Rs2 billion into startups as equity-free capital, is expected to contribute positively to the industry. Analysts, however, caution that a significant transformation will take time.
Ambitious Targets and Predictions
While there is notable growth in gross IT exports during the first half of fiscal year 2023-24, achieving the government’s ambitious target of $5 billion appears challenging. Analysts predict gross IT exports for the entire fiscal year will likely fall within the range of $3-4 billion, compared to the $2.6 billion recorded the previous year.
Resilient IT Sector Shows Promise
The dynamic growth in Pakistan’s IT exports reflects the industry’s resilience and potential. Stakeholders are optimistic about the sector’s future with continued government support and industry-friendly policies.
Monitoring the IT Sector’s Role in Economic Landscape
As the country positions itself as a technology hub, the IT sector’s performance will be closely monitored for its role in contributing to the overall economic landscape. The industry’s progress will play a vital role in shaping Pakistan’s future as a significant player in the global technology arena.
