Quantifying the ripple effect of Pakistan's digital commerce

Digital commerce injected USD 1.2B into Pakistan’s economy in FY 2023-24, reshaping jobs, earnings and formalisation.

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Pakistan's economic narrative is often told in the language of macro indicators and industrial output. But a new chapter is being written by digital commerce, and its impact is profoundly human. It's a story of empowerment, opportunity, and a reshaping of livelihoods across the nation. We've all seen the rise of online platforms, but what's often missed is the incredible human story unfolding behind the transactions. It's not just about the convenience of ordering food or shopping online, but about how this digital shift is creating new pathways for people to thrive in a changing economy. To understand this human story more adequately, we must look beyond narratives and into the data.

Recently, LUMS undertook a first-of-its-kind study quantifying the ‘Economic Impact Assessment of foodpanda in Pakistan’, highlighting the company’s significant USD1.20 billion (PKR 335 billion) contribution to the economy in FY2023/2024. This figure represents more than just a boost to GDP; it's the fuel for countless individual journeys. Imagine a young entrepreneur in a small city now able to reach customers across the country, or a rider now able to utilise his assets to complement his earnings through operating on the platform, or a restaurant once limited to its neighborhood, now thriving with a newfound ability to deliver its flavors to a wider audience. Digital commerce isn't just about business growth, but about breaking down geographical barriers and empowering individuals to take control of their economic destinies and share their passion with broader communities. This individual empowerment creates a larger, interconnected economic effect that benefits the entire local economy.

The LUMS study showcases the significant contribution that businesses in the e-commerce space have on the fabric of the local economy. In particular, the findings on economic multipliers demonstrate a significant ripple effect - for every rupee generated, additional value is created in sectors like food and beverages, hospitality, and manufacturing. This economic interconnectedness translates into real-world benefits, like more jobs, increased incomes, growth, profits, and sustainable livelihoods. The growing influence of this ripple effect is evident when we look at the sector’s year-over-year performance.

Interestingly, the evolution of foodpanda’s impact on the economy reflects the increasing integration of digital commerce into the fabric of Pakistani society. Beyond the economic contribution, the study also brings to life a very real impact in relation to households - roughly speaking, the USD 1.2 billion monetary impact is equivalent to providing meals for an estimated 6 million households. This means improved nutrition, convenience, and a better quality of life for families across Pakistan. Additionally, the rising tax contributions from this sector, reaching PKR 9.76 billion in FY 2023/2024, highlight another crucial aspect of this transformation in the shape of formalization. Digital platforms are bringing economic activity into the mainstream, contributing to the nation's financial resources and enabling greater investment in public services. These impressive results speak to the fundamental strengths of the Pakistani people and the supportive environment being built.

The finding is also a testament to the resilience and adaptability of the Pakistani people and the improving macroeconomic conditions, which are critical not just for businesses to sustain but also to attract more investment locally. This transformation is supported by substantial investments in Pakistan's digital infrastructure, a commitment that speaks to the immense potential of the nation's digital landscape. The true impact, however, goes beyond infrastructure and balance sheets.

To take full advantage of this potential, strategic policy interventions are fundamental. The current Government has made significant advancements in resolving existential issues facing the economy, but we must do more - there is an urgent need to streamline regulations, bridge the digital divide through enhanced literacy and infrastructure, and empower SMEs to thrive in this new landscape. By creating an environment that encourages innovation and inclusivity, Pakistan can unlock the full power of digital commerce and write a new story of economic success, driven by the aspirations and achievements of its people.