Flat-lining ICT exports

The star of Pakistan’s exports in recent years is becoming dim. At the half-yearly close in December 2022, the Information and Communication Technology (ICT) services exports have grown at the slowest pace in nearly a decade. As per the latest data from the State Bank of Pakistan (SBP), ICT exports stood at $1.33 billion in 1HFY23, an increase of just 2 percent year-on-year. That pales in comparison with the nearly 25 percent average yearly growths seen in the five-year period between FY18 and FY22.

Within the main ICT export components, there was quite a bit of variance in growth this fiscal thus far. Under the main ‘computer services’ category (totaling $1.07bn), there was an 11 percent yearly growth in the export of computer software to $302 million and a 6 percent yearly increase in the export of software consultancy services to $392 million in Jul-Dec FY23 (albeit both these segments’ growth is way down vis-à-vis previous years). However, ‘other computer services’ exports declined 6 percent to $367 million.

Under the ‘telecommunication services’ category (totaling $265mn), the ‘call center’ exports grew by 5 percent year-on-year to $107 million (growth is still lower compared to what was seen in recent years). Whereas the core ‘telecom services’ exports went down by 4 percent year-on-year to $158 million in 1HFY23. The latter services include the proceeds earned by local carriers on the long-distance & international (LDI) services provided to overseas telcos on the calls made here and terminated abroad.

Compared to the overall goods and services exports of the country declining 5 percent year-on-year to $17.73 billion in 1HFY23, the nominal growth in ICT services exports looks somewhat decent. As a result, the share of ICT exports in Pakistan’s overall exports improved to 7.5 percent in the fiscal-year-to-date period (compared to 7% in 1HFY22 and 5 percent average share in the same period between FY18 and FY22). A bigger share of ICT exports on a growing base of overall exports would be ideal.

Considering that the full-year ICT exports totaled $2.6 billion back in FY22, can these services accelerate in the second half and produce double-digit growth for FY23? With the latest forecasts downplaying recession prospects in Pakistan’s main IT export markets of North America and Europe, there is reason to be optimistic that IT budgets (capital and operating) in those markets won’t see the big cuts as previously feared. Besides, imminent PKR depreciation to correct exchange-rate anomalies may also encourage ICT exporters to route home more of their overseas earnings. Let’s see how things turn out in the end.