Pakistan to miss FY23 IT exports target by ‘big margin’

Rehan Ayub
Saturday, Mar 25, 2023

KARACHI: Pakistan will miss $5 billion IT exports target for the financial year 2023, as the country has managed to reach only $1.72 billion in 8 months of FY23, a research report stated on Friday.

IT exports went down 3 percent year-on-year (YoY) in February, while on month-on-month basis, the exports were up by 3 percent to $195 million. The numbers were hit by around 24 percent YoY decline in telecom services.

“IT ministry of Pakistan has set an export target of $5 billion for FY23. Current fiscal year monthly average run rate of $215 million indicates that Pakistan will be missing the export target by a big margin,” Topline Securities said in its report.

It explained that a slowdown in IT exports was mainly indicative of a global slowdown in IT spending. In its latest report, the brokerage mentioned, Gartner (Technology Research and Consulting firm) has revised down its growth forecast of IT spending to 2.4 percent in 2023 from earlier 5.1 percent.

Among computer services, other services increased by 20 percent MoM. Computer software remained flat and software consultancy decreased by 9 percent MoM. For most of January 2023, 10-15 percent gap existed between interbank and grey market rates of US Dollar, which led to Jan-23 exports declining by 23 percent MoM.

After reduction of the gap between the two market rates at the end of Jan’23, IT export realisation for Feb’23 was expected to post better recovery MoM. Exports for Feb’23 have stayed below the $200 million mark for the second consecutive month, and the amount is below the 6-month rolling average of $215 million.

On a broader level, a slowdown has occurred after April 2022, with YoY growth averaging 2 percent in May’22 to Feb’23, compared to average 31 percent YoY growth in prior ten month period from Jul’21 to Apr’22.

In 8MFY23, IT exports are up by 2 percent YoY to $1.72 billion. A slight growth has been due to 3 percent YoY growth in computer services to $1.39 billion. As a result of slight MoM recover in Feb-23, IT exports as a percentage of total exports have increased to 7.0 percent.

“This is compared to 5.9 percent in Feb’22 and 6.7 percent in Jan’23. In 8MFY23 IT exports as a percentage of total exports stand at 7.3 percent compared to 6.7 percent in 8MFY22,” the report stated.

Segment wise breakdown for the month of February 2023 indicated that telecom services were flat MoM and decreased by 24 percent YoY to $29.6 million and computer services increased by 3 percent MoM and 2 percent YoY to $165.1 million, it added.

The total share of telecom/computer services exports for Feb’23 stood at 15pc/85pc respectively compared to 19pc/81pc share in Feb’22.

In 8MFY23, telecom/computer share of exports stand at 19pc/81pc compared to 20pc/80pc share in 8MFY22. As per the report, it’s because computer services exports increased by 3 percent YoY in 8MFY23, driven by 12 percent growth in export of software and 3 percent in software consultancy.

Net IT exports (exports-imports) during 8MFY23 increased by 20 percent YoY to $1.52bn compared to 2 percent YoY growth in overall IT exports for the same period.

Net IT exports on TTM (trailing 12 months) basis as of Feb-23 grew by 20 percent YoY to $2.3 billion. Feb’23 monthly number increased by 17 percent YoY to $176 million.

Despite a global slowdown, software and IT services spending is expected to increase by 9 percent and 6 percent respectively in 2023, according to Gartner research, against an overall growth estimation of 2.4 percent for 2023.