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ISLAMABAD: Pakistan’s services sector has shown modest growth in the current fiscal year, with exports climbing 6.04% year-on-year to reach $5.46 billion during the first eight months of FY25, according to the latest data from the Pakistan Bureau of Statistics (PBS). This rise, up from $5.15 billion in the same period last year, has largely been driven by strong performance in the IT and telecom sectors highlighting the country’s growing digital economy.
The standout contributor was the telecommunication, computer, and information services segment, which saw an impressive 25.48% surge. Between July and February, this sector alone brought in $2.482 billion, up from $1.978 billion a year earlier, as per figures released by the State Bank of Pakistan (SBP). This strong performance reflects both the global demand for digital services and Pakistan’s expanding talent pool in IT-related fields.
Other business services also posted a modest rise of 1.42%, with exports inching up to $1.073 billion. However, not all sectors followed this upward trend.
Mixed Signals from the Transport and Travel Sectors
Exports of transport services dropped by 6.5%, totaling $618 million, while travel services saw a 2.74% decline to $496 million. The August 2024 figures also painted a grim picture with a 6.5% month-on-month drop in overall services exports, indicating occasional volatility despite the general growth.
In local currency terms, services exports rose by 3.5%, amounting to Rs1.519 trillion in the eight-month period compared to Rs1.468 trillion in 8MFY24.
On a more positive note, February 2025 showed signs of resilience, with a 5% year-on-year rise in monthly services exports. The country exported services worth $709.96 million, up from $676.17 million in February last year, signaling a continuing recovery following earlier setbacks.
Rising Imports Offset Gains, Widening Trade Gap
While exports showed moderate growth, imports of services surged, putting pressure on the overall trade balance. In February alone, services imports skyrocketed by 32.7% to $1.013 billion, up from $763.42 million a year earlier. Over the eight months, imports rose 12.03% to $7.709 billion.
Higher spending on transport and travel services primarily fueled the growth in service imports. Transport services imports reached $3.386 billion, up 9.36% year-on-year, while travel service imports grew 14.77% to $1.662 billion—largely due to increased airfare costs and international travel demand.
This surge in imports caused the services trade deficit to balloon by 29.85%, hitting $2.250 billion between July and February, compared to $1.732 billion in the same period last year. The deficit was especially pronounced in February, jumping 247.37% to $303.06 million from just $87.25 million in the corresponding month of the previous year.
Government Eyes $15 Billion in IT Exports
Despite the current imbalances, the government remains optimistic. An ambitious target has been set to push IT exports to $15 billion within the next five years, capitalizing on the momentum in digital services. This goal, if met, could significantly strengthen Pakistan’s external account and reduce reliance on traditional exports like textiles.
Pakistan’s growing digital services sector offers a bright spot in an otherwise mixed trade picture. However, the rising import bill particularly in transport and travel poses challenges for policymakers aiming to narrow the services trade deficit.
