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Technology exports of Pakistan declined sharply by 27 percent

Sharp decline in technology exports of Pakistan is claimed to be a result of regressive taxation regime instead of extended Eid holidays

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In May 2022, technology exports of Pakistan declined sharply by 27 percent month-on-month which is the lowest monthly level since February 2021. According to the State Bank of Pakistan (SBP), IT exports in May totaled for $183 million which stood at $249 million a month ago. The exports fell by 8 percent year-on-year.

In May 2021, Pakistan exported $198 million worth of technology-related products and services. The technology sector recorded exports worth $2.4 billion in 11 months of this fiscal year, contributing 38 percent to overall services’ export and marking a 25 percent year-on-year jump.

The export performance of IT services firms has been positive, helping to improve foreign exchange earnings for the country. However, monthly fall in their export statistics in May is not a good sign for the country’s trade and current account deficits.

Read more: IT industry abandoned in the budget 2022-2023

Assumed reason behind fall in IT exports is the extended Eid holidays. Since the pandemic resulted in a rise in freelancing, the export performance of country’s technology products and services stayed higher.

However, despite the Prime Minister of Pakistan’s ambitious declarations to target USD 15 billion in IT and IT-enabled services exports, the released budget brings down the industry’s potential to meet this aim. According to Badar Khushnood, Chairman of P@SHAthe currently implemented regressive taxation regime has already proven disastrous to the IT industry’s growth. This year’s targeted exports of USD 3.5 billion are also not being achieved due to the introduction of an inefficient tax regime. Rather than facilitating the IT industry with more and better incentives to catalyze the existing organic growth, the previously announced one and the only benefit, i.e., ‘tax exemption’ committed till 2025 has been abruptly reneged and revoked. If nothing else, this is a recipe for disaster for a nascent yet fastest growing exports-led sector!”

During the peak of Covid-19, and even after the pandemic-related instructions were lifted in many nations throughout the world, remote working and e-learning settings were encouraged. Ultimately, it helped in increasing information and communication (ICT) exports. Exports of ICT increased in almost every sector, including software consulting, call centers, and telecom services.

The government and the SBP are working hard to support this fast-growing services sector, particularly by making it easier to receive export revenues and providing tax breaks and incentives.

Moreover, SBP claimed in its first quarterly report on the status of Pakistan’s economy for FY2022 that Pakistan’s digital services firms and tech entrepreneurs are continually boosting their exports and are now benefiting from the significant increase in global investments streaming into tech startups.