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KARACHI: Information Technology (IT) exports for October 2022 increased by 13 percent on year-on-year basis to $221 million due to an increase of 38 percent/8 percent YoY in telecom/computer services.

Export number also recovered by 7 percent on month-on-month basis from September 2022, mainly due to a 42 percent MoM increase in telecom services.

Latest export number is also over 6-month rolling average of $212 million. Exports are however down 15 percent from its peak of $260 million in March 2022.

In the first four months of FY23, exports are up by 3 percent YoY to $854 million. The IT Ministry has set a target of $3 billion exports for FY23. Current fiscal year run rate of $214 million monthly average and 6-month rolling average of $212 million have raised concerns whether Pakistan will be able to achieve this target.

The IT sector exports have depicted a 5-year CAGR of 23 percent (FY18-FY22) and a 10-year (FY13-FY22) CAGR of 19 percent. Therefore, the current growth trajectory is below the historical trend.

However, according to IT industry experts, the sector is still growing near the levels of its 5-year CAGR but the growth is not being reflected in the headline number due to volatility of PKR compared to the US$ and companies not bringing complete dollar flows in the country. Hence, currency stability going ahead will remain vital for improvement in headline export numbers going ahead.

Slowdown in global IT spending is also a concern which is impacting IT exports. According to latest report by Gartner (Technology Research and Consulting firm), growth in IT spending is expected to slow down to 1.0 percent in 2022 compared to 10 percent growth in 2021. Economic slowdown and inflationary pressures are leading to IT spending cuts.

As of October 2022, TTM (Trailing Twelve Months) IT exports have increased by 13 percent YoY to $2.64 billion. This is compared to 46 percent YoY growth at the same time last year (October 2021).

Net exports (Exports-Imports) on TTM basis in Oct-2022 however have grown by 19 percent YoY to $2.09 billion. October 2022 monthly number has increased by 27 percent YoY to $168 million.

Segment-wise breakdown for the month of October 2022 indicates that Telecom Services increased by 42 percent MoM and by 38 percent YoY to $48.9 million and Computer Services were flat MoM and increased by 8 percent YoY to $171.8 million.

The total share of telecom/computer services exports for October 2022 stood at 22 percent/78 percent, respectively compared to 18 percent/82 percent in October 2021.

In the first four months of FY23, however, there is an increasing trend of computer share with telecom/computer share of exports for the first four months of FY23 standing at 19 percent/81 percent compared to 21 percent/79 percent share in the first four months of FY22.

Net IT exports during the first four months of FY23 have increased by 14 percent YoY to $721 million compared to 3.0 percent YoY growth in overall exports for the first four months of FY23.

The annual number of FY22 presents a broader growth trend of value-addition with telecom/computer services share standing at 19 percent/81 percent compared favorably to share of 39 percent/61 percent in FY17.

Growth of IT companies and training of IT professionals has have led to rise in share of computer services, an analyst at Topline Securities said.

This value-addition is leading to higher net exports (Exports minus Imports) of the sector since computer services exports are mostly human resource driven, he added.

“Going forward, training of IT professionals, removal of key sector bottlenecks and revival of global economy will remain key to the future of IT exports.”

Copyright Business Recorder, 2022

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