Pakistan to reach only 50% of its $5bn IT exports target

• IT players retaining greater portion of proceeds outside country: report.
• IT export proceeds realisation declined to $10.7 million/day in May.
• Report says number of clearing days impacts realisation of proceeds.

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

The country is falling short of the IT exports target by a considerable margin on the back of struggling business confidence amid persistent political and economic uncertainty. IT ministry set a target of $5 billion for exports in FY23, which are expected to reach only $2.58 billion.

“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% month-on-month (MoM) against $191 million in April 2023.

Segment-wise, telecom and computer services increased by 92% and 11% MoM.

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

IT exports increased on an MoM basis on a higher number of working days in May 2023 compared to the previous month (Eid holidays).

According to the brokerage, the number of clearing days impacts the realisation of proceeds.

The number of May 2023 exports is the 2nd highest in FY23 (Dec 2022: $246 million) and above the FY23 average exports of $215 million.

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 a year-on-year (YoY) basis, the IT export number for May 2023 increased by 28% on a 95% YoY increase in telecom and a 16% YoY increase in computer services.

The increase on a YoY basis is due to a low base effect (May 2022: $184 million) and the interbank rates.

In 11MFY23, IT exports have marginally declined by 1% compared to the same period the previous year. The total share of telecom/computer services exports for May 2023 stood at 24%/76%, compared to the 15%/85% share in May 2022.

In 11MFY23, telecom/computer share of exports stood at 19%/81% compared to 20/80% share in 11MFY22.

Net IT exports (exports - imports) for May 2023 increased by 26% MoM and 46% YoY to $211 million.

Net exports in the 11 months increased by 16% YoY to $2.1 billion, compared to a decline of 1% YoY in gross IT export numbers.

Pakistan’s total exports from July 2022 to May 2023 fell 12.14% 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 import restrictions.