IT Exports in December 2023 Went up 17%

Staff Report

IT exports in December 2023 have gone up to a record high as they stood at US$303 million, up 17% MoM and 23% YoY in Dec-2023.

IT exports in Dec 2023 are also higher than the last 12-month average of US$222mn.

As per channel checks, the jump in IT exports is due to (1) relaxation in the permissible retention limit by the State Bank of Pakistan (SBP), increasing it from 35% to 50% in the Exporters’ Specialized Foreign Currency Accounts, and stable PKR currency which encouraged IT companies to repatriate their foreign income and deposit it in local accounts.IT Exports Increased by 16% in October 2023

To highlight, the reported IT export number indicates the amount remitted back to Pakistan by technology companies. As per the IT Minister, IT companies have parked an estimated US$1-2bn outside of Pakistan.

1HFY24 IT exports clocked in at US$1.5bn, up 9% YoY compared to US$1.3bn recorded in 1HFY23.

Net IT Exports (Exports-Imports) also recorded an increase of 16% MoM and 13% YoY to US$263mn in Dec-2023.

These net IT export numbers in Dec-2023 are also higher than the last 12-month average of US$197mn. In 1HFY24 net IT exports recorded a growth of 7% YoY to US$1.3bn.

The government has recently launched the Pakistan Startup Fund, under which it will invest Rs2bn every year into startups as equity-free capital.

We believe these efforts by the government will bring positive momentum to the industry; however, it will take time for a significant transformation to occur.

Although there has been a growth in gross IT exports during 1HFY24, the government’s ambitious target of reaching US$5bn seems challenging. Analysts anticipate that gross IT exports for FY24 will likely fall within the range of US$3-4bn compared to US$2.6bn recorded last year.

Within the IT sector, Systems Limited (SYS) is our preferred pick. SYS is currently trading at a 2024F PE ratio of 10.5x and a PS ratio of 1.8x.

IT Minister Dr Umar Saif said in a statement that IT exports hit a record high in December thanks to government policies.

After 13% in November, IT exports increased by 17% to 303 million dollars in December, he said adding that the facility of keeping 50% of dollars, digital payment system, and facilities for freelancers are the main factors.

He said that the Prime Minister is grateful to the Special Investment Facilitation Council.

“Our policies aim to promote the IT and Telecom sector and stabilize the country’s economy, he said adding that this is just the beginning, big results will come soon, and the target of 10 billion dollars will be fulfilled.

He has congratulated the entire IT industry on achieving such a milestone.

Tufail Ahmed Khan, President and CEO, of the Pakistan Freelancers Association, said the contribution of freelancers in the IT trade has been growing with every passing day as experienced professionals are actively serving foreign clients on an individual and group basis, which also reflected the growth in the inflow of IT exports.

These professionals are making money through various freelance and social media platforms, whereas some of them are getting direct clients for handsome amounts as compared to salary packages offered by local companies.

Further, the number of freelance professionals is increasing in the country after acquiring skills through training offered by various institutions and welfare organizations for in-demand fields.

Tufail added that the number of IT remittances will continue to grow in Pakistan as the young generation is seriously pursuing education in the field of IT to work for international companies and earn money in dollars.

Going forward, the establishment of E-Rozgar centers and the availability of payment options will also encourage students and workers of different skill sets to avail the upcoming facilities from the government, which will likely add more IT exports in the future.