IT exports soar, AI triggers job cuts

Entry-level hiring down 25% as exports hit $4.6b, freelancers account for $1.6b

KARACHI:

Pakistan's information technology industry has just posted its strongest year on record. It has also started shedding people faster than at any point in its recent history. Both statements are true, and that is the paradox now hanging over the country's most celebrated export story.

State Bank of Pakistan (SBP) data show IT and IT-enabled services receipts climbed to $4.6 billion in fiscal year 2025-26, up about 21% from $3.814 billion a year earlier. The sector is now the largest services export category, accounting for close to half of all services earnings. It still missed the government's $5 billion target by roughly $400 million. The longer-term Uraan Pakistan goal remains $10 billion by FY2028-29.

The same year, the Pakistan Software Houses Association (P@SHA) found entry-level hiring at major technology firms down around 25%. Employment among developers aged 22 to 25 has fallen nearly 20% since 2024. Entry-level freelance listings have dropped from about 15% of the market to below 9%. Basic writing and translation work is down 32% year-on-year as clients switch to AI tools. One Islamabad software house has said it cut as much as 80% of delivery-side roles after replacing routine work with AI. Another software house located in NASTP Silicon Valley in Karachi, which provided website development services to clients in the Middle East, is reported to have decreased its employee strength from around 150 to nearly 35%.

"At first glance, it may seem contradictory that Pakistan's IT exports are growing while software companies are laying people off," said Syed Azfar Hussain, Project Director at the National Incubation Center Karachi. "But both trends are happening because the industry is going through a major transformation. AI is taking over many routine coding and support tasks, so companies no longer need as many people for the same work."

The demand that is rising, he added, is for a different workforce: artificial intelligence, cloud computing, cybersecurity and data engineering. "The challenge isn't that opportunities are disappearing. It's that the skills employers need are changing much faster than before." If Pakistan reskills at scale and moves into higher-value services, Hussain argued, AI can drive both export growth and longer-term job creation rather than only layoffs.

Two industries, not one

Chief Executive of Jaffer Business Systems, Veqarul Islam draws a sharper line between the domestic market and the export machine. On the local side, he said, not a single Pakistani tech company has scaled to a size comparable with the country's major industrial groups. Tech elsewhere grows on the back of corporates, government demand for systems and institutions stronger than personalities. Pakistan, he argued, drifted after the 1980s into weak institutions and personality-driven governance. Technology needs data, audits, transparency and accountability. Those foundations never matured, capital preferred real estate, and large groups that did experiment with tech often retreated to brick-and-mortar.

The export side looks better on paper. Islam is not convinced the headline number tells the whole story. "There is a lot of scepticism in the industry, myself included, on the growth numbers. The devil is in the detail." Freelancers now account for about a quarter of IT export receipts, or roughly $1.6 billion. Islam said he respects entrepreneurship, but tax design has encouraged full-time employees of both tech and non-tech firms to rebadge as freelancers. "This is a death of corporatisation. Countries grow at the back of growing corporates. Individuals are a part of this growth and not the other way round."

The United States remains the dominant destination, followed by the United Kingdom, the UAE, Canada and Europe, with the Middle East and Africa rising. Islam said geopolitics and AI now require a pivot toward markets that will still matter in a decade, not only those that pay today's invoices.

What the boom has, and has not, delivered

The foreign-exchange gain is real. ICT remains far less import-intensive than textiles, and a large share of the value stays in wages paid at home. Online banking, commerce and payments have changed how urban Pakistanis live. Islam's verdict on national transformation is colder: the impact on the country's overall progress has been "negligible." Global tech majors have either left, shrunk local operations or never treated Pakistan as a serious market. Microsoft closed its local office in 2025. Careem's global restructuring has hit Pakistani engineering and support staff.

AI, Islam said, is a bigger disruption than anything in living memory, larger, in his view, than the industrial revolution. Machines that once only executed instructions now recommend, act and outperform humans on a widening set of tasks. The binding constraints are energy, chips, compute, networks and, above all, trusted data. Pakistan remains a largely undocumented economy. Without institutions that put technology at the centre of governance, he does not expect a broad transformation outside pockets such as banking, telecoms and defence.

China, he noted, has energy in abundance and is closing the gap on chips and foundation models. It already matters for Pakistan in defence and infrastructure. But Chinese partners, he said, are weaker at training local talent, sharing practices and putting Pakistanis in key roles. The Western growth model, by contrast, has historically developed local industry. Balance-of-trade data, he added, is a blunt but useful guide to how open a partner really is to Pakistan's own growth.

Crash training schemes that promise to "skill thousands" in IT and AI leave him unimpressed. "How many times in the past have we seen such initiatives? How many times have they made an impact? These are optics." Money, he said, would be better spent on schools, colleges and universities than on short programmes whose impact is announced before it is measured.

Connectivity is another drag. Unreliable cross-border links have already dented client confidence. Pakistan has not attracted top global tech and telecom investors in the way regional peers have. "Our basics need some serious introspection," Islam said.