Pakistan to miss $5bn IT exports target by half

KARACHI: Pakistan is set to miss its $5 billion IT exports target for the financial year 2023 by half, as the country has managed only $2.37 billion in 11 months of FY23, according to a brokerage report released on Wednesday.

IT ministry set a target of $5 billion for exports in FY23, which are expected to reach only $2.58 billion.

The country is falling short of the IT exports target by a big margin on the back of struggling business confidence amid persistent political and economic uncertainty.

“IT players are retaining a greater portion of their proceeds outside the country due to declining business confidence and volatility of exchange rate,” Topline Securities said in the report.

IT export number only indicates the amount remitted back to Pakistan by technology companies and freelancers. It does not include income retained abroad.

In May 2023, IT exports were recorded at $236 million, up 23 percent month-on-month (MoM) against $191 million in April 2023. Segment wise telecom and computer services increased by 92 percent and 11 percent MoM.

Among computer services, export of software, other services and software consultancy increased by 14 percent, 13 percent, and 8 percent MoM, respectively.

IT exports increased on a MoM basis on higher number of working days in May 2023 compared to the previous month (Eid holidays). The number of clearing days has an impact on realisation of proceeds, according to the brokerage.

The number of May 2023 exports is the 2nd highest in FY23 (Dec 2022: $246 million), and also above the FY23 average exports of $215 million. At the current run rate IT exports are expected to clock in at $2.58 billion in FY23. IT export proceeds realisation per working day declined to $10.7 million/day in May 2023 compared to $11.2 million/day in April 2023.

On year-on-year (YoY) basis, IT export number for May 2023 increased by 28 percent on 95 percent YoY increase in telecom and 16 percent YoY increase in computer services. The increase on a YoY basis is due to low base effect (May 2022: $184 million) and the interbank rates. In 11MFY23, IT exports have marginally declined 1 percent as compared to the same period the previous year. The total share of telecom/computer services exports for May 2023 stood at 24 percent/76 percent respectively compared to 15 percent/85 percent share in May 2022. In 11MFY23, telecom/computer share of exports stood at 19 percent/81 percent compared to 20/80 percent share in 11MFY22.

Net IT exports (exports - imports) for May 2023 increased by 26 percent MoM and by 46 percent YoY to $211 million. Net exports in the 11 months increased by 16 percent YoY to $2.1 billion compared to decline of 1 percent YoY in gross IT exports number.

Pakistan’s total exports from July 2022 to May 2023 fell 12.14 percent to $25.37 billion, and the decline can be attributed to multiple economic challenges, including unprecedented inflation, rupee devaluation, political instability, and shortage of raw materials due to restrictions on imports.