For the better part of the last decade, Pakistan’s economic growth rate has been inconsistent at best. There have been periods of boom followed by bust, with the duration between the two getting shorter lately. The reasons are known to everyone and their uncle, including the uncles who are responsible for causing the mess in the first place.

Though it may be some time before we get to the boom part, there is finally a glimpse of stability. Or so everyone says, with demands for a cut in the policy rate echoing loud, especially when inflation in May came close to single digits. According to the latest data, the economy is projected to grow by 3.1 per cent in FY24, which is certainly a great improvement compared to the decline of 0.21pc last fiscal year.

However, in our search for hope within the headline numbers, we are missing a much more dangerous trend. For decades, the information and communication sector has been Pakistan’s biggest growth driver. Between FY15 and FY24, the sector rose at a compound annual growth rate of 6.6pc. This was more than twice as fast as the overall economy and ahead of all other broad sectors. The trend remains the same even if you stretch your lens further by a decade.

Considering how other developing countries have managed to expand their entire economies at faster rates, these numbers may not look as exceptional. But this was still the best we had, though not any longer. The early warning signs appeared when the sector’s gross domestic product slipped by 0.8pc in FY23 — sharper than the overall economic slowdown of -0.21pc. It didn’t raise too many eyebrows at the time, perhaps due to the general doom and gloom the country was facing.

Information and communication GDP is projected to dip by another 3.02pc in FY24 while tech companies park their finances abroad

If there were any doubts earlier, none are left now. As per the latest data, information and communication GDP is projected to dip by another 3.02pc in FY24, making it the worst annual change on record. Previously, the sharpest decrease in the sector’s income was -1.83pc, all the way back in FY14.

Moreover, it’s also the second straight year of decline for information and communication, which last happened in FY10 and FY11. Consequently, it is now among the only three sectors to have consecutively fallen for two years, along with finance & insurance and general government.

Consequently, the sector’s GDP in April-June is projected to be Rs258.3 billion, the lowest in 12 quarters or three years. Basically, the sector’s income today, in constant rupee terms, is lower than what it was during Q4FY21.

For the uninitiated, information and communication includes industries like telecom, publishing and technology. While the former has been struggling for some time, on the back of declining revenue per user and rupee devaluations, the latter was easily the brightest spot in our economy.

We have heard countless times in op-eds, speeches, and conferences about the potential of Pakistan’s technology industry and how the country can become a global hub for exports. Though there’s truth in such statements, it would require some serious efforts on our part to get there.

Unfortunately, data shows a completely different path at the moment.

One could also argue the shortcomings of the data, as is often the case with official numbers, particularly from the Pakistan Bureau of Statistics.

This may very well be true, and information and communication probably doesn’t give a complete picture of the sector, especially the technology component. But remember, the same methodology was yielding healthy growth until FY22, so something has definitely changed in the last two years.

A better explanation about the slowdown, nay decline, in the technology industry is how many companies are now parking their money abroad and only bringing back the absolutely necessary amount. This basically means that there’s still growth, but the official data fails to capture it.

Unfortunately, that’s not exactly a win: an industry critical for the country’s growth is becoming informal. Maybe if we continue on this path, there will come a day when all technology companies will exclusively be incorporated abroad and pay their employees directly in foreign wallets. Meanwhile, we will continue to harp on about how freelancers are growing.

The writer is the co-founder of Data Darbar

Published in Dawn, The Business and Finance Weekly, June 10th, 2024