Pakistan's information technology sector has just logged its best-ever annual export performance, but the government is already betting that artificial intelligence will define the next chapter of growth. The challenge now is whether the country can transform a surge in low-value digital services into a globally competitive, AI-enhanced economy. Main Developments During FY26, IT and ICT export earnings reached a record $4.6 billion, up 21 percent from $3.8 billion in FY25, according to Federal Minister for IT & Telecom Shaza Khawaja. The sector generated a trade surplus of $3.9 billion — the highest ever among Pakistan's services sectors. IT exports now account for roughly 11.7 percent of total exports, making it one of Pakistan's most important sources of foreign exchange. Freelancer earnings grew 78 percent to $1.76 billion in FY26, as reported by Dawn. Read also: 3 ways under-invoiced Chinese fabric is hurting Pakistan's cotton industry On July 16, 2026, Pakistan became a founding member of the World Artificial Intelligence Cooperation Organisation (Waico), an intergovernmental body headquartered in Shanghai. Deputy Prime Minister Ishaq Dar signed the agreement at the World AI Conference, with UN chief António Guterres in attendance. Waico was launched in July 2026 to advance AI governance, capacity-building, and equitable access for developing nations. Pakistan is among 29 founding members, including China, Russia, Kazakhstan, Indonesia, and several other Global South nations. Prime Minister Shehbaz Sharif formally backed the Waico proposal during his May 2026 visit to China, agreeing to deepen bilateral AI, digital economy, and innovation cooperation. Pakistan's National AI Policy, released in 2025, designates AI a national priority. Background Pakistan's narrow export base has long been a structural weakness. Traditional exports remain concentrated in textiles and food, while merchandise exports of $69.76 billion almost entirely consume combined foreign exchange from goods exports ($30.14 billion) and remittances ($41.59 billion). This imbalance forces Pakistan to rely on fresh borrowing and rollovers for external debt repayments, creating a persistent external financing gap. The State Bank of Pakistan recently reported a $1.83 billion balance of payments deficit in FY26. IT and IT-enabled services (ITeS) offer an alternative: they can expand without heavy dependence on imported raw materials, physical logistics, or expensive infrastructure. The sector also creates high-value employment for a young population, converting human intelligence into an internationally tradable asset. In February 2026, the government committed $1 billion by 2030 to expand sovereign computing and research. The Sino-Pak Centre for AI at Haripur and the National Centre of AI at the National University of Sciences & Technology are advancing education, research, and development. Why It Matters Under the Uraan Pakistan plan, the target is to raise IT exports to $10 billion by FY29. According to Topline Securities, this requires a compound annual growth rate of 29.5 percent through FY29 — significantly higher than the 21 percent growth recorded in FY26. Achieving this objective will require not just more people entering the industry but a transformation in the quality and sophistication of services Pakistan sells. The country must develop companies capable of selling complete technological solutions, managing international projects, creating IP, and building globally recognised brands. AI will transform agriculture, manufacturing, banking, healthcare, logistics, and governance through analytics, automation, and intelligent decision-making. Pakistani companies that ignore AI will compete against faster, cheaper, and more intelligent producers. An AI-assisted engineer can do what once required several engineers; an equipped BPO worker can serve more customers. The opportunity lies in selling human-plus-AI capability. Pakistan produces tens of thousands of IT professionals annually — one of the region's largest talent pools. What's Next The real value of Waico membership depends on what Pakistan does with it. Membership alone won't create an AI industry. Pakistan must use Waico to expand computing infrastructure, strengthen AI education, promote joint research, facilitate tech transfer, attract venture capital, and create international market access for local firms. Waico should serve as a platform to achieve the $10 billion IT export target by FY29. The government must teach AI across universities and workplaces, aiming to export not just digital labour but AI-enhanced solutions. Pakistan needs to move beyond increasing low-value exports toward higher productivity and value addition. IT and ITeS can bridge the country's youth population to the global economy, but only if the nation develops globally competitive digital capabilities.