Microsoft’s recent withdrawal from Pakistan serves as a dire warning for the nation’s digital future, a leading economist cautioned on Monday, urging the government to act swiftly to avert further damage. Former Islamabad Chamber of Commerce President Shahid Rasheed Butt described the tech giant’s closure of its Pakistani operations after 25 years as a symptom of deeper economic and regulatory challenges.

The move, officially part of a global restructuring, saw over 9,100 job losses and a shift to partner-led operations in several regions. However, Microsoft’s continued investment in nations like Vietnam and Egypt, coupled with a $3 billion expansion in India, underscores growing apprehension about Pakistan’s investment landscape.

Butt stressed that Microsoft’s pullout represents a reputational blow to Pakistan’s entire digital sector. The loss extends beyond customer relations to encompass vital knowledge transfer, access to advanced solutions, and training programs that have bolstered local IT development.

Butt revealed that Microsoft had previously explored closer collaboration with Pakistan, with Bill Gates meeting with Pakistani officials in 2022. However, political hurdles and a lack of institutional interest stalled progress, leading Microsoft to choose Vietnam for expansion that same year.

Pakistan’s worsening economic situation has further contributed to this strategic shift, Butt noted. A trade deficit of $24.4 billion in FY 2024, dwindling foreign exchange reserves of just over $11.5 billion, and stagnant IT exports despite global growth create a risky environment for expansion, he argued.

Butt warned that Microsoft”s departure could trigger a wider exodus of international companies, who may opt to serve Pakistan remotely through hubs like the UAE or Singapore. Without immediate reforms, Pakistan”s digital economy risks becoming a mere consumer, not a creator, he cautioned. Even the symbolic closure of such a prominent operation signals Pakistan”s lack of preparedness for sustained digital engagement.

Butt called for a consistent, long-term tax policy for IT and cloud services, along with regulatory clarity and renewed engagement with global tech leaders. He also recommended expanding domestic cloud infrastructure, supporting local IT companies, and ensuring seamless service delivery by Microsoft”s remaining partners. He emphasized the urgency of the situation, stating that any delay would lead to further withdrawals and deeper isolation from the global digital landscape.