Budget: will it power tech economy or stall its promise?
The federal budget for FY 2025-26 arrives at a critical juncture. As Pakistan grapples with economic fragility, youth unemployment and declining investor confidence, the technology sector still offers one of the few credible paths towards sustainable growth. But even this promise risks fading, choked by a familiar cycle of lofty declarations with little follow-through.
For years, slogans like Digital Pakistan, IT exports and Startup Pakistan have echoed across stages and press conferences. Yet these remain ceremonial, rarely backed by budgetary or institutional commitment. The FY26 budget, like many before it, acknowledges the sector but stops short of empowering it.
References to digitisation and startups are there but feel like afterthoughts. There is no substantial allocation to expand fibre broadband or improve rural connectivity. These are foundational requirements for any meaningful digital economy. The Universal Service Fund remains underpowered. Key areas such as artificial intelligence, cloud computing and cybersecurity are barely acknowledged. These are not futuristic ambitions. They are current global imperatives.
The neglect of public cloud infrastructure is particularly telling. Around the world, governments are investing in sovereign cloud to ensure data control, cybersecurity and efficient citizen services. Meanwhile, Pakistan continues to rely on outdated hosting and procurement models while spending heavily on foreign software licences. We have not created the policy or regulatory environment that would attract global players like Microsoft, Oracle or Amazon to establish localised cloud zones in the country.
This is not just about reducing costs. Localising global cloud infrastructure means protecting national data, supporting critical fintech and public services, improving cybersecurity and restoring investor confidence. Countries like Qatar, Saudi Arabia and even Kuwait have been able to achieve this successfully. Pakistan, despite its population and potential, has not. The reason is not capability. It is the lack of political will and policy coherence.
To move forward, fiscal incentives are not enough. We need a complete overhaul of our licensing systems, a clear cloud procurement framework and enforceable data protection policies that support international standards and welcome strategic investment.
Our underperforming technology exports are another missed opportunity. Despite talent and diaspora strength, Pakistan's IT and IT-enabled services exports remain flat at around $3 billion. Delegations continue to travel to international expos labeled as promotion, yet few convert into meaningful outcomes. We lack market intelligence, follow-up mechanisms and synergy with embassies or trade bodies.
The country must shift from exhibition-based engagement to targeted market expansion. That means using data to identify high demand regions, strengthening diaspora commercial diplomacy and aligning visa, trade and marketing policies accordingly. Forex Retention Cards and a robust Digital Export Facilitation Portal can reduce friction and support growth.
Startups in Pakistan also remain underserved. Early stage capital is scarce. Regulatory inconsistency deters innovation. Public innovation agencies like Ignite are underfunded. Gender inclusive policy support is largely symbolic. And there is minimal room for experimentation in areas like fintech, healthtech, agritech or education technology.
Pakistan needs a government-backed Tech Growth Fund, tax holidays for early stage startups and regulatory sandboxes that allow innovation to mature. Grants for women-led ventures are not just desirable, they are essential if we want to build an inclusive technology economy.
All of this is complicated by a harsh and fragmented tax regime. Advance income taxes, overlapping provincial levies and ambiguous procedures punish digital businesses. Freelancers and software exporters struggle with remitting earnings. The FY26 budget has ignored these fundamental friction points.
It is time to reinstate long-term tax exemptions for digital exporters, introduce zero rating for in-house developed software and unify digital taxation through a single window. Otherwise, we risk driving our best talent out of the country while chasing token foreign exchange.
Behind these gaps is a more systemic failure. There is no central authority responsible for driving digital transformation across government. Ministries and agencies continue to operate in silos, leading to duplicated projects, inconsistent platforms and wasted resources. The establishment of a Central Digital Governance Authority is not a luxury. It is a national need. This body must have legal authority and cross-institutional mandate to drive implementation, track performance and ensure accountability across public sector initiatives.
Another missed opportunity is talent development. The budget refers to skills but offers no strategy to future proof the workforce. What we need is not more unstructured training but a national education model aligned with global demand. Leading tech nations invest in talent as their core asset. Pakistan has the youth but not the planning.
A National Digital Skills Fund must be created in partnership with global tech providers such as Microsoft, Cisco and AWS. The school curriculum must be upgraded to embed STEM skills and computational thinking. Skilling must be scalable, industry driven and outcome based. We cannot outsource this to non-profits and hope to compete globally.
In the end, the FY26 budget appears more focused on fiscal optics than digital transformation. It may satisfy IMF checklists but it does little to address the urgency of economic reinvention. Other nations are building cloud parks, launching national AI strategies and attracting tech investment at scale. We are still debating whether digital transformation is viable. It is not just viable. It is vital.
Pakistan's technology economy can be the engine that drives us out of crisis. But engines need fuel, direction and commitment. That means infrastructure. That means policy. That means institutional leadership. We must move from ceremonial launches to systemic reform, from scattered events to connected ecosystems and from policy talk to measurable performance.
The world will not wait for us to catch up. Neither will our young people. The time to act was yesterday. The time to recover it is today.
The writer is ex-MPA of the provincial assembly of Sindh, tech professional and education and child rights activist
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