IT exports fall 23pc to eight-month low in January

KARACHI: Pakistan’s information technology (IT) exports for January 2023 decreased by 23 percent month-on-month (MoM) to lowest since May 2022, data showed on Wednesday, with a hint that a gap between exchange rate markets had contributed to the decline.

IT exports for Jan’23 stood at $190 million, with 20 percent and 35 percent MoM decline in computer and telecom services respectively. Among computer services, exports of computer software and software consultancy dropped by 25 percent and 15 percent MoM respectively.

The substantial decline in January is indicative of 10-15 percent gap existing between interbank and grey market rates of US Dollar for most of the month. However, after reduction of the gap between market rates at the end of Jan-23, IT export proceeds realisation from formal banking channels is expected to recover.

On year-on-year (YoY), IT exports for Jan’23 increased by 2 percent due to 8 percent YoY increase in telecom services. The exports for Jan-23 are lowest since May 2022 which was $184 million. The amount is below the 6-month rolling average of $221 million.

On a broader level, a slowdown is being witnessed after April 2022, with YoY growth averaging 3 percent in May 22-Jan 23, compared to average 32 percent YoY growth in prior nine month period of Aug 21-Apr 22.

The slowdown in IT exports is mainly indicative of a global slowdown in IT spending. In its latest report, Gartner (Technology Research and Consulting firm) has revised down its growth forecast of IT spending to 2.4 percent in 2023 from earlier 5.1 percent.

IT ministry of Pakistan has set an export target of $5bn for FY23. The current fiscal year monthly average run rate of $218 million indicates that Pakistan will be missing the export target by a big margin.

In 7MFY23, IT exports are up by 2 percent YoY to $1.52 billion. A slight growth has been due to 3 percent YoY growth in computer services to US$1.22bn.

As a result of MoM decline in Jan-23, IT exports as a percent of total exports have declined to 6.8 percent. That is compared to 6.2 percentages in Jan-22 and 8.1 percent in Dec-22. In 7MFY23, IT exports as a percentage of the total exports stand at 7.4 percent, compared to 6.9 percent in 7MFY22.

Segment-wise breakdown for the month of January 2023 indicates that the telecom services declined by 35 percent MoM and increased by 8 percent YoY to $29.7 million, and computer services decreased by 20 percent MoM and increased slightly YoY to $159.9 million.

The total share of telecom/computer services exports for January 2023 stood at 16 percent/84 percent respectively, compared to 15 percent/85 percent share in January 2022.

In 7MFY23, telecom/computer share of exports stood at 19/81 percent compared to 20/80 percent share in 7MFY22, on the back of computer services exports that increased by 3 percent YoY in 7MFY23, driven by 12 percent growth in export of software and 6 percent in software consultancy.

The net IT exports (exports-imports) during 7MFY23 have increased by 20 percent YoY to $1.34 billion, compared to 2 percent YoY growth in overall IT exports for the same period. The net IT exports on TTM basis as of Jan-23 also have grown by 19 percent YoY to $2.2bn. Jan-23 monthly number increased by 23 percent YoY to $178 million.