Pakistan's IT Exports Skyrocket with Remarkable 24.4% CAGR Growth

In recent years, Pakistan’s IT exports have grown at a CAGR of 24.4 percent between FY17 and FY22, still way long to go as it comprises less than 1% of the global IT market.

Pakistan’s IT exports surpassed $2.6 billion, representing a phenomenal increase over the past few years. Nonetheless, its share of the global IT export market is less than 1 percent, well below its potential.

According to a study by the State Bank of Pakistan (SBP), Pakistan’s share of global exports of computer services increased from 0.17 percent in 2017 to 0.3 percent in 2021, but it is still relatively low.

In terms of export diversification, total IT exports are concentrated in a small number of markets, with the United States’ share exceeding 55 percent from FY13 to FY22. Pakistan’s exports to the top five markets, the United Kingdom, United Arab Emirates, Singapore, and Ireland, increased marginally from 10 to 12 percent by the end of the previous fiscal year.

Multiple factors contribute to export market concentration. Small IT companies lack the resources to explore international markets, particularly non-traditional markets (i.e., markets other than the United States, United Kingdom, and the United Arab Emirates), with which Pakistan does not have significant commercial or historical ties. Eighty percent of firms export less than one million dollars annually, and more than ninety percent export less than half a million dollars.

IT exports increased to $2.1 billion in FY22 from $0.89 billion in FY19 and $0.29 billion in FY13, with software and software-related exports accounting for the majority of the growth. As a consequence, IT exports are becoming an increasingly important source of foreign exchange for the economy.

Since the country’s hardware industry is not as developed as the software industry, Pakistan primarily exports software and software-related goods. The official statistics for Other Computer Services presently include freelance export earnings ($265 million in FY22). Lastly, it was estimated that an additional $1.5 billion of IT (including software and software consultancy) and IT-enabled exports were on the gray market in 2019, which, according to current industry estimates, could have increased to $2.5 billion by FY22.

In terms of export classification, IT is part of Pakistan’s larger ICT sector, which was valued at $269 million in FY06. It took more than a decade for ICT exports to surpass $1 billion in fiscal year 2018. Since then, however, the growth rate has accelerated significantly, with ICT exports surpassing $2 billion by FY21 and $2.5 billion by FY22.

ICT’s contribution to total service exports rose from 7.2% in FY06 to 37.7% in FY22, making it the largest contributor to service exports. Computer services (IT exports) contributed 80.5% (or $2.1 billion) of Pakistan’s ICT services exports in FY22, with the remainder of the inflows coming from telecommunication services (including call centers) and a negligible share of the information services segment.

Based on an analysis of Pakistan’s export markets and exports by firm, the SBP’s semi-annual report, “The State of Pakistan’s Economy,” concluded that there is significant room for development in international trade.