Pakistan's Trade Dynamics in 2026 — IT Exports Surge as Merchandise Trade Faces Structural Challenges

KARACHI — Pakistan's trade dynamics are undergoing a significant transformation in 2026, with record-breaking IT exports offsetting a decline in merchandise trade, while the State Bank of Pakistan projects GDP growth between 3.75 and 4.75 per cent. The economic recovery remains heavily reliant on domestic consumption, imports, and workers' remittances rather than traditional exports.

IT and IT-enabled services exports reached an all-time high of $437 million in December 2025, marking the first time monthly export revenue exceeded $400 million. Total IT exports for the first half of FY26 stood at $2.24 billion, and by the end of the first nine months (July-March), the figure surged to $3.38 billion — a 19.7 per cent growth compared to $2.82 billion in the same period last year. The government has set an ambitious target of $5 billion for IT exports in FY26.

Services Sector Driving Growth

Overall services exports have risen by 17.05 per cent during the first nine months of the current fiscal year, reaching $7.34 billion in July-March FY26, up from $6.27 billion in the corresponding period last year. The IT sector remains the primary driver of this growth, with expanding client bases in the Gulf Cooperation Council (GCC) region.

The State Bank of Pakistan's supportive policies, including relaxation of the Exporters' Specialised Foreign Currency Accounts (ESFCA) retention limit from 35 to 50 per cent, have contributed to the sector's momentum.

Merchandise Trade Challenges

Despite the IT boom, Pakistan's overall merchandise trade exports experienced a decline in the first half of FY26. The SBP attributed this downtrend to structural issues, including:

• Low productivity — Industrial output remains below potential, limiting export competitiveness
• Policy inconsistencies — Frequent changes in trade policy have created uncertainty for exporters
• Weak global value chain integration — Pakistan remains on the periphery of global supply chains
• Product diversification gaps — Rice exports, a key agricultural export, saw notable decline

GDP and Economic Outlook

The SBP projects GDP growth at 3.75 to 4.75 per cent for FY26, though it has warned that the recovery remains more reliant on domestic consumption, imports, and remittances rather than exports and productive investment. Remittances from overseas Pakistanis continue to provide a crucial buffer for the economy.

Government Measures

To address structural challenges, the government has introduced several measures, including 100 per cent tax exemption on IT export income, simplified procedures for IT exporters and freelancers, and the auction of 5G spectrum which generated $509 million — signalling the telecom sector's bullish outlook and enabling better connectivity for digital exports.

Future Outlook

While the IT sector's trajectory remains strong, economists emphasise the need for structural reforms in merchandise trade, including improving productivity, diversifying export markets, and strengthening integration with global value chains. The government's focus on digital infrastructure and IT exports provides a promising pathway, but addressing traditional export sector challenges remains critical for sustainable economic growth.