KARACHI: Pakistan’s Information Technology (IT) exports experienced a remarkable surge of 24% in May 2023, reaching a total of $236 million. This surge, compared to the previous month, is a positive sign for the IT sector, although there was a slight decline of 1% in exports on a year-on-year (YoY) basis.
Speaking to Daily City News, Nasheed Malik of Topline Securities, said telecom and computer services showed notable growth on a month-on-month (MoM) basis, with increases of 92% and 11% respectively. In the computer services segment, the export of software, other services, and software consultancy recorded growth rates of 14%, 13%, and 8% respectively.
The overall technology exports in May 2023 witnessed a significant YoY increase of 28%, making it the highest monthly export figure since December 2022, as stated by Arif Habib Limited (AHL) research. However, during the 11 months of FY2023, technology exports amounted to $2.369 billion, which marks a 1% decline compared to the previous year.
While the country has posted its third consecutive monthly current account surplus, amounting to $255 million in May 2023, experts predict this surplus to be short-lived. Head of Research at JS Global Capital, Amreen Soorani stated, “Although the current account surplus continues, it is still expected to be short-lived.”
The MoM increase in IT exports can be attributed to the higher number of working days in May 2023 compared to April 2023, according to Malik. Furthermore, services exports excluding IT also showed growth, increasing by 18% MoM in May 2023. However, the realisation of IT export proceeds per working day declined from $11.2 million in April 2023 to $10.7 million in May 2023.
On a YoY basis, IT exports in May 2023 increased by 28% to $236 million, primarily driven by a 95% YoY increase in telecom and a 16% YoY increase in computer services.
The increase on a YoY basis is partly due to the low base effect, as May 2022 witnessed IT exports totalling $184 million. Additionally, the increase may be attributed to the interbank rates reaching Rs298.93 on May 11, 2023. However, in the 11 months of FY2023, IT exports experienced a marginal decline of 1% YoY, recording $2.37 billion.
Malik highlighted that the IT export number only indicates the amount remitted back to Pakistan by tech companies and freelancers, excluding income retained abroad. He noted that IT players are retaining a greater portion of their proceeds outside the country due to declining business confidence and exchange rate volatility.
At the current run rate, IT exports are expected to reach $2.58 billion in FY2023, indicating a 1% YoY decline compared to FY2022, he said.
In terms of segment-wise breakdown, telecom services exhibited impressive growth, increasing by 92% MoM and 95% YoY, reaching $55.5 million in May 2023. Similarly, computer services grew by 11% MoM and 16% YoY, amounting to $180.3 million.
Net IT exports (minus imports) for May 2023 increased by 26% MoM and 46% YoY, reaching $211 million. Over the 11 months of FY2023, net exports increased by 16% YoY to $2.1 billion, contrasting the 1% YoY decline in gross IT exports.
Based on the trailing twelve months (TTM) basis as of May 2023, net IT exports grew by 17% YoY, amounting to $2.29 billion. As a result of the increase in IT exports in May 2023, the percentage of IT exports in total exports stood at 7.4% for the month.
Looking ahead, despite the global slowdown, Gartner research predicts that spending on software and IT services will increase by 12% and 9% respectively in 2023, presenting an opportunity for exporting companies in Pakistan.