The $10 billion floor: Why Pakistan’s digital future is now a race against time and itself

TFD Report

KARACHI: Picture a young woman in Faisalabad. Call her Hira, a stand-in for thousands like her. She freelances for clients in Dubai and Riyadh and earns more in dollars than her father did in a lifetime of salaried service. Now picture a man in Lahore, call him Bilal, equally illustrative, who has grown a software house from four engineers to eighty and bills tens of thousands of dollars a month abroad. When the Federal Budget 2026-27 was presented on 12 June, both were watching for the same thing: did it move Pakistan closer to its goal of $10 billion in IT exports by FY2029? Two weeks on, the answer is encouraging, with a clear agenda for what comes next.

“For the established software exporter, this was a good budget,” says Shahzad Arif, CEO of AKS iQ and a veteran of more than two decades in the sector. “For the freelancer and the content creator, it moved in the right direction. And for the firm trying to become a multinational, it set the stage for the next conversation. The honest way to read it is sector by sector, and on that reading there is a great deal to build on.”

For exporters: The predictability they asked for
Software exporters emerged among the biggest winners, with the Finance Bill extending the 0.25% concessionary tax rate on IT and IT-enabled exports until Tax Year 2029, reducing withholding tax on export proceeds, and raising the super-tax threshold to Rs500 million. Shahzad Arif says the measures provide long-term policy certainty and meaningful tax relief, enabling IT firms to plan growth with greater confidence.

For freelancers and startups: Real relief and the next opportunity
For Hira’s cohort, the budget brought welcome relief. Advance tax on foreign card payments was cut from 5 percent to 0.5 percent, a ninety percent reduction that directly helps anyone paying for cloud services and software licences in dollars. Startups were spared withholding under Clause 43F, and venture-capital pass-through treatment was restored.
Shahzad Arif welcomed the reduction in card taxes on overseas digital purchases, calling it a significant relief for freelancers and small studios. He urged the government to build on the measure by legally recognizing freelancers and enabling seamless international payment platforms, saying these reforms would accelerate Pakistan’s freelance exports and strengthen the digital economy.
One measure invites a rethink. Withholding on income from social-media and digital platforms was set at 5 percent. “The creator economy is one of our youngest, fastest-growing export streams,” he says. “A lighter touch here would let it find its feet and reward the very entrepreneurship we want to encourage. It is a small adjustment with a large signalling effect.”

For Telecom and infrastructure: A solid step up
The IT and Telecommunication Division received Rs19.58 billion under the PSDP, a 20.7% increase, to support technology parks, AI initiatives and youth programmes. The budget also retained zero customs duty on submarine cable equipment and removed duty on feature phones, strengthening digital connectivity.
“The PSDP rise is welcome and the continued zero duty on submarine-cable equipment is quietly important, it is the backbone our exports physically ride on,” Arif says. “Infrastructure clearly got attention, and the allocation of two thousand megawatts to data centres and AI shows real forward thinking about compute at national scale. The logical complement is to extend that same vision to ring-fenced, competitively priced power for the IT parks and software houses doing the exporting. These are not competing priorities; they are two halves of the same digital-economy strategy. If we are powering the infrastructure of the future, powering the firms earning today’s dollars belongs in the same plan.”

The Bigger Opportunity Ahead
The largest prize, Arif argues, is structural and sits beyond any single tax line. “This budget did well by those already exporting. The next frontier is the leap that truly gets us to $10 billion: helping small software houses become product-led multinationals. Today we largely sell hours; tomorrow’s growth lies in selling products. The nations that broke through, India through STPI, Estonia by building a digital state, owned the intellectual property, the software and AI platforms the world pays for repeatedly. A structured national programme for this, including state-backed venture funds that catalyse private capital the way Vietnam and Estonia did, with growth capital, export financing, and procurement preference that lets a Pakistani product compete for government and global contracts, would be the single highest-return investment the state could make. The tax foundation is now in place; this is the natural structure to build on it.”

That opportunity is sharpened by the world outside. “India is consolidating a $250 billion services industry and the Gulf is securing sovereign AI compute at remarkable scale, while US export controls make advanced chips harder to source,” he says. “We will not out-spend them, but we can out-focus them. The budget’s tax stability gives us the foundation; the product and financing ecosystem is what we build on top. The budget laid an important brick. Our task together is to complete the wall.”

Shahzad Arif credits one area of genuine foresight, says “On digital assets, Pakistan has moved impressively fast, the Virtual Assets Act, a permanent regulator in PVARA, tens of millions of users. The real prize there is not speculation but stablecoin rails that could help solve the very payments challenge our freelancers face. The pieces are on the table; connecting them is the exciting work ahead.”
The verdict

So did the budget move Pakistan toward $10 billion? “Yes, this is a genuine and welcome first step, and the direction is right,” Arif says. “It delivered tax predictability and real infrastructure investment. The agenda it sets up for next year is equally clear: a payments solution, a legal identity for freelancers, and a ladder for firms to scale into product companies. The target is well within reach. In truth $10 billion should be our floor rather than our ceiling, because India built far more, and Vietnam added billions in just a few years, from foundations no stronger than ours. A budget is a down payment, and this was a confident one.”
Shahzad Arif returns to Hira and Bilal. “She has a cheaper tax on her tools; next she needs an easy way to collect her earnings. He has a stable tax rate; next he needs the capital to scale. The budget helped them both, and the path to helping them fully is now visible. Uraan means flight. This budget built more runway. With the next set of decisions, our people take off, and the momentum is firmly on our side.”