Pakistan’s IT Exports Witness Decline for First Time in 5 Years – Why?

For the first time in 5 years, Pakistan has witnessed a decline in IT exports. It isn’t a great sign for our economically fragile country, which is already battling with a severe balance of payment crisis. The IT sector witnessed considerable growth in the last 5 years and it was expected to further expand. However, unfortunately, it didn’t happen. Pakistan’s IT exports dropped by $0.25 billion in the first 11 months of this fiscal year (2022-2023), according to a source.

It is pertinent to mention here that the government had fixed a target to export $5 billion worth of IT products in the fiscal year 2023. A credible source is even suggesting that Pakistan has achieved the target however the documented IT exports for the first eleven months of this fiscal year stand at $2.36 billion.

As evident, Pakistan’s IT exports reached $2.61 Billion in the last fiscal year and the country couldn’t achieve its target in the current fiscal year. It is disappointing to see Pakistan being unable to grow its IT exports despite having tremendous potential. Our neighbor India is earning more than $ 200 billion dollars from IT exports and we are not even in the race. So what went wrong? 

As per our research, some of the reasons for this decline are as follows:

LC Bans & Shutting Down of Local Mobile Assemblies:

A letter of credit (LC) from the Central Bank is required for any entity that wants to import any good in the country. For a larger part of the previous fiscal year, LCs were banned because of the balance of payment problems. Because of it, the IT companies specifically the local mobile assemblies were unable to import the necessary equipment for producing goods for export.

Lack of government support & non-conducive policies:

Pakistan’s IT exports have declined due to inadequate government support and non-conducive policies. Experts believe that there is insufficient investment in IT infrastructure and research and development. It has limited the IT sector’s growth potential. There is a lack of tax incentives and subsidies for IT companies, which holds significance for the growth of IT companies.

Payment Gateway Problems:

Pakistan’s IT exports have been hampered by payment gateway issues. Limited availability and accessibility of reliable payment gateways like PayPal for international transactions have made it difficult for businesses to receive payments from abroad.

Dollar Hoarding Because of the Rupee Depreciation:

The decline in Pakistan’s IT exports can also be attributed to dollar hoarding resulting from the depreciation of the Pakistani rupee. As the value of the rupee decreases, individuals and businesses tend to hold onto their foreign currency holdings, anticipating further depreciation. For example, if a company has exported any IT product and received the payment through Payoneer (an international payment gateway), it may not withdraw the money or change it to rupee to get more gains through depreciation in the future.

Also read:

IT Exports Decreases 23% to Eight-month low in January 2023