Ayesha Saba

Strategic policy interventions, investment in human capital, and infrastructure development are essential to fully harness the potential of Pakistan’s services sector.

“With the right approach, the sector can play a transformative role in reshaping the country’s economic trajectory,” said M Sadiq Hussain, an analyst at the Policy, Advocacy, and Research Section of Pakistan Software Houses Association (P@SHA). Speaking to WealthPK, he highlighted the vulnerabilities of Pakistan’s agriculture sector to climate change and the manufacturing sector’s struggles amid high production costs, energy shortages, and policy inconsistencies.

“This has made the role of the services sector in the national economy all the more important as it now contributes over 50% to the country’s GDP, making it a more dynamic and adaptive alternative for economic advancement.” “Pakistan’s demographic dividend is a key driver of the services sector’s expansion. With a young and increasingly urban population, the demand for a diverse range of services, including digital connectivity and financial inclusion, continues to grow,” he stated.

Despite the sector’s resilience, he emphasised the need to address structural challenges. “Targeted investments in infrastructure, comprehensive regulatory reforms, and strategic skill development initiatives are imperative to ensure sustained growth and enhance the sector’s competitiveness,” he asserted. Hussain further highlighted the significant potential of IT-related ventures in Pakistan’s economic landscape.

"The accelerating digitisation of businesses and the broader economy has created an enabling environment for the rapid growth of IT-driven enterprises,” he observed. However, despite these advancements, Pakistan still lags behind its peer economies in certain critical areas. For instance, Pakistan's IT exports stand at mere Rs1.9 billion per annum on average compared to India′s staggering export earnings of Rs100 billion.

This stark disparity underscores the need for Pakistan to address structural impediments and invest strategically to bridge the gap. Furthermore, India has successfully leveraged its IT and business process outsourcing industries to generate substantial export revenues, positioning them as global leaders.

Therefore, policymakers must enhance regulations, digital infrastructure, and global market access through trade agreements and export incentives. Strengthening intellectual property protections, reducing bureaucratic hurdles, and providing financial support will further drive investment and sectoral growth.

Pakistan’s services exports increased by 7.8% to $3.275 billion during the first five months of the current financial year (FY25) from $3.044 billion over the same period of the previous fiscal, according to trade data from the Pakistan Bureau of Statistics.

This growth reflects an upward trend in the country’s services sector, contributing to its overall trade performance.  Services imports during the same period also grew by 2.88%, totalling $4.425 billion, up from $4.301 billion in the previous year. As a result, the services trade deficit narrowed by 9.48% during the first five months of FY25.

Credit: INP-WealthPk