Pakistan's internet slowdown and its economic development future

Why the country's digital economy is under threat

In the last few weeks, Pakistanis have been facing a country-wide internet slowdown. One organization estimates that internet speeds across the nation have dropped by 30-40 percent. The disruptions have led to widespread speculation that the government is secretly implementing a firewall to better surveil the internet. The country’s IT minister has attributed the slowdown to citizens’ VPN over usage, while also admitting to the government making their own cybersecurity upgrades. Most recently, disruptions have been attributed to faulty submarine cables. Regardless of why the disruptions have occurred, they are wreaking havoc on Pakistan’s digital economy and its future economic development.

Experts estimate that the disruptions could result in up to $300 million in losses, roughly equal to the revenue generated by Pakistani freelancers last year. These losses, however, will be felt across Pakistan’s larger IT sector, which is expected to bring in over $3 billion in exports this year. The country’s IT exports experienced a boom during the pandemic and have grown year-on-year since. This is in large part due to freelancers having consistent access to the internet. While the reasons behind the internet slowdowns remain unclear, it is vital that Pakistan invest in infrastructure to prevent them from reoccurring in the future.

Internet access can drive economic development through its supply- and demand-side impacts on an economy, especially high-speed internet access. Despite less than half of people having access to the internet, Pakistan has the third highest supply of online gig work in the world, with over 2.4 million active freelancers. These freelancers have managed to make a name for themselves despite having to work with below average broadband speeds. The research on the impact of high-speed internet in Africa, however, implies that Pakistan’s digital economy is yet to unlock its full potential.

From 2000 to 2018, high-speed internet was introduced in various African nations. One study reveals that the arrival of high-speed internet increased interbank transactions and private-sector lending significantly. Another paper finds that high-speed internet increased employment by 7-13 percent across countries, primarily among high-skilled workers. High-speed internet connectivity has also been found to boost the size of foreign direct investment receipts by one-third, as well as improve governance and firm performance.

From food delivery drivers to call center agents to software developers, Pakistan’s gig workers have made leaps and bounds in an otherwise struggling economy. Their contributions no doubt trickling down to those without internet access. Despite stagnant GDP growth, inflation peaking, and all-time low foreign direct investment, online work represents a ray of light for millions of Pakistanis, which begs the question: what do authorities really stand to gain from the slowdown?