Despite connectivity challenges, the IT sector achieves 15th consecutive month of growth, with exports up 15% YoY.
Record-Breaking IT Exports Amid Challenges
Pakistan’s IT sector recorded its highest-ever monthly exports in December 2024, achieving $348 million despite persistent internet disruptions and low connectivity. This marks a 15% year-on-year (YoY) growth and a 12% increase month-on-month, surpassing the 12-month average of $299 million.
The achievement reflects 15 consecutive months of YoY IT export growth since October 2023. Cumulatively, IT exports in the first half of FY2024-25 (1HFY25) reached $1.86 billion, up by an impressive 28% YoY.
Factors Driving IT Export Growth
According to Nasheed Malik, an official at Topline Research, several factors contributed to the surge in IT exports:
- The global expansion of Pakistani IT companies’ client base, particularly in the GCC region.
- The State Bank of Pakistan’s (SBP) relaxation of the permissible retention limit in Exporters’ Specialised Foreign Currency Accounts, increasing it from 35% to 50%.
- The introduction of equity investment abroad through these accounts.
- The stabilisation of the local currency, which encouraged exporters to repatriate more profits.
Pakistani IT companies actively participated in international events, such as Oslo Innovation Week 2024 and the Pak-US Tech Investment Conference, fostering collaborations with global clients.
New Developments: Equity Investment Abroad
In FY2024-25, the SBP introduced a new category, Equity Investment Abroad (EIA), aimed at export-oriented IT companies. This initiative allows exporters to acquire equity stakes in foreign entities using up to 50% of proceeds from their foreign currency accounts.
A recent survey by the Pakistan Software Houses Association (P@SHA) revealed that 62% of IT companies maintain specialised foreign currency accounts. This step has boosted exporters’ confidence and strengthened the IT sector’s growth trajectory.
Challenges Limiting Potential
Despite these positive developments, widespread internet connectivity issues remain a significant hurdle. Analysts estimate that frequent disruptions and slow speeds cost millions in lost revenue.
Analyst Insights on Future Growth
Senior IT and Telecom Sector Analyst Muhammad Yasir predicts that IT exports may settle between $3.6 billion and $4 billion by the end of FY2024-25. However, with focused efforts, Pakistan could surpass the $4 billion mark, driven by the growing contributions of IT companies and freelancers.
Yasir highlighted how Pakistani IT firms are aggressively exploring business opportunities in non-traditional markets like the GCC while maintaining their presence in traditional markets. Events like GITEX and Singapore Tech Week have been instrumental in connecting these companies to global clients.
He stressed the urgent need for the government to address internet connectivity issues, as the IT sector plays a vital role in stabilising Pakistan’s current account and boosting the national economy.
Conclusion
The IT sector’s record-breaking exports in December 2024 showcase its resilience and potential. However, for Pakistan to unlock its full potential and achieve sustainable growth, addressing infrastructure challenges like internet connectivity is essential.