IT Exports Increased by 16% in October 2023
Staff Report
Pakistan IT exports in October 2023 totaled US$238 million, showing a 16% month-on-month increase.
Segment-wise, Telecom, Computer, and Information Services rose by 49%, 9%, and 50% month-on-month, respectively.
For October 2023, IT export inflows were higher than the last 12-month average of US$219 million.
The month-on-month increase in IT exports for October 2023 was primarily due to a higher number of working days compared to September 2023 and higher realization per day.
Banking channel checks indicate that higher clearing days impacted the realization of proceeds.
IT export realization proceeds per day also increased by 5% month-on-month in October 2023.
Product-wise, software Consultancy increased by 35% month-on-month (up US$19 million to US$74 million), and Telecom Services rose by 90% month-on-month (up US$14 million to US$29 million) in October 2023.IT Exports up by 10% in August 2023
Services Exports (excluding IT) of Pakistan remained flat month-on-month at US$418 million in October 2023.
Year-on-year, IT exports for October 2023 increased by 8% due to remarkable performance in the export of Software Consultancy, up 11% year-on-year, and other Computer Services, up 19% year-on-year.
In the first four months of fiscal year 2024, IT exports increased by 4.4% year-on-year to US$893 million.
The reported IT export number represents the amount remitted back to Pakistan by tech companies. Channel checks reveal that tech companies are retaining a greater portion of their proceeds outside Pakistan due to declining business confidence and volatility in the exchange rate.
According to the IT Minister, IT companies have parked around US$1-2 billion outside Pakistan.
To attract offshore-parked foreign currency from IT firms, the State Bank of Pakistan (SBP) announced in October 2023 an increase in the permissible retention limit from 35% to 50% in the Exporters’ Specialized Foreign Currency Accounts (ESFCAs). This is expected to contribute to an increase in IT exports in the coming months.
Net IT Exports (Exports-Imports) for October 2023 reported a 25% month-on-month and 21% year-on-year increase to US$205 million. In the first four months of fiscal year 2024, Net IT Exports recorded a growth of 5% year-on-year to US$763 million.
Net IT Exports on a trailing twelve-month basis as of October 2023 also grew by 12% year-on-year to US$2.3 billion.
In the first four months of fiscal year 2024, gross IT exports as a percentage of total exports were reported at 7.4%, compared to 7.2% in the same period of the previous year.
The Telecom/Computer Services export mix for October 2023 is recorded at 21/79%, respectively, compared to 22%/78% in October 2022.
In the first four months of fiscal year 2024, the Telecom/Computer export mix was 19/81%, compared to 20/80% in the same period of the previous year.
According to Gartner’s forecast for 2024, worldwide spending on software is expected to grow by 13.8%, and spending on IT services is anticipated to increase by 10.4%.
Software spending in the MENA region is expected to record double-digit growth of 12.3% in 2024, with IT services spending growing at 11.1% next year. This growth is driven by accelerating digitalization and increasing automation.
This growth presents an opportunity for companies like Systems Limited (SYS), which is a preferred pick in the IT sector. Since 53% of SYS’s revenue is sourced from the MENA region, robust growth in that area will directly benefit the company.
SYS currently trades at a 2024 forecasted Price-to-Earnings (PE) ratio of 11x and a Price-to-Sales (PS) ratio of 1.6x.
