Behind Pakistan’s IT export boom: can software succeed where textiles have stalled

By Agnes Javed
ISLAMABAD, July 23 (Wealth Pakistan) — For decades, Pakistan has relied on textiles to earn the foreign exchange needed to keep its economy running. But as rising energy costs, political uncertainty and fierce global competition squeeze the country’s traditional exporters, another industry is quietly gaining ground—not in factories, but behind computer screens.
Pakistan’s IT exports reached $4.6 billion in fiscal year 2026, a 21% year-on-year increase from FY25’s $3.814 billion, making digital services one of the country’s fastest-growing export sectors. The figures have encouraged policymakers eager to diversify an economy long dependent on cotton, garments and remittances.
Yet the industry’s emergence is about more than impressive statistics. Interviews with industry participants suggest Pakistan’s technology sector is reaching a turning point, driven by shifts in global outsourcing, a young English-speaking workforce and increasingly supportive government policies. The challenge now is whether the country can transform that momentum into a globally competitive technology industry rather than remaining a supplier of low-cost digital labour.
For Sohail Sarwar, the transformation has unfolded over nearly two decades.
After working for Chinese and American technology companies, Sarwar returned from Beijing several years ago for family reasons. He continued serving overseas clients remotely before joining a Pakistani IT company that provides digital services to customers in Britain, the United States and elsewhere. His career mirrors a broader shift in the global technology industry, where geography has become less important than connectivity and skills.
“Our clients are mainly from the UK and the US,” Sarwar said, adding that his company’s revenue increased by roughly 25 to 30 percent over the past year as overseas demand continued to grow.
His experience reflects a wider trend reshaping Pakistan’s technology sector.
The normalization of remote work after the pandemic has broadened the global market for software development and digital services. At the same time, businesses seeking to control costs are outsourcing not only software engineering but also digital marketing, customer support, cybersecurity and, increasingly, artificial intelligence-related work.
Pakistan has become an increasingly attractive destination for that business. It combines a large pool of young professionals with widespread English proficiency and labour costs that remain well below many competing markets. Once known primarily as one of the world’s largest freelance hubs, the country is now producing companies capable of managing long-term international projects rather than simply supplying individual programmers.
That evolution, Sarwar argues, represents a fundamental change in the industry’s business model.
Instead of competing solely by providing software developers at lower hourly rates, Pakistani companies are beginning to sell complete digital solutions—from AI-powered customer service systems to automated marketing platforms and predictive analytics.
“The industry is moving from ‘Labour-as-a-Service’ to ‘Value-as-a-Service’,” he said.
The distinction matters.
Artificial intelligence is expected to automate many routine programming tasks over the coming decade, making low-cost coding alone a diminishing competitive advantage. Companies able to package technology into integrated business solutions are likely to capture a larger share of global digital spending than those relying purely on labour arbitrage.
Government policy has also become more supportive.
Recent reforms allowing IT exporters to retain a larger share of their foreign-currency earnings, together with the extension of preferential tax treatment for the sector through 2030, have improved business confidence and encouraged more companies to operate formally.
Sarwar described the tax regime as one of the most meaningful policy measures introduced for the industry, saying it has provided the certainty companies need to invest and expand.
But he is equally clear that policy announcements alone are not enough.
Although foreign-exchange rules have improved, many commercial banks still lack the expertise to process technology-export documentation efficiently, leaving companies to navigate inconsistent procedures that slow international business.
“The implementation still needs to become clearer across the banking sector,” he said.
Those institutional frictions illustrate a broader reality: Pakistan’s technology companies often succeed despite structural obstacles rather than because those obstacles have disappeared.
Reliable electricity remains far from guaranteed. To avoid costly interruptions, companies routinely maintain backup generators, uninterrupted power systems and multiple internet connections. For firms developing AI applications, unstable international connectivity and high import duties on advanced graphics processors add further costs, forcing many to rely on overseas cloud providers instead of building computing capacity at home.
In effect, businesses spend heavily simply to create the stability that competitors in more developed technology ecosystems often take for granted.
That reality helps explain why Pakistan’s next stage of development may prove more difficult than its first.
The country has already demonstrated that it can compete internationally by exporting skilled labour. The larger question is whether it can build globally recognized technology companies capable of producing intellectual property, attracting long-term investment and developing advanced products in fields such as artificial intelligence.
Other Asian economies have already made similar transitions, albeit through different paths. Vietnam integrated itself into global manufacturing supply chains to become an electronics export powerhouse. Pakistan’s opportunity lies elsewhere. Rather than exporting smartphones or semiconductors, it is seeking to export software, digital services and increasingly, technological expertise.
Whether that ambition succeeds will depend less on maintaining another year of double-digit export growth than on resolving the infrastructure, institutional and skills bottlenecks that continue to constrain the industry’s evolution.
For Pakistan, the significance of the current IT boom is therefore not simply that another export sector is expanding.
It is that, for the first time in decades, the country may have identified a credible path toward diversifying its export economy beyond textiles. Whether that path leads to a sustainable technology ecosystem—or remains another promising opportunity constrained by structural weaknesses—will shape Pakistan’s economic trajectory long after this year’s export figures are forgotten.