PixelArt made with pygame

ConvertPos should be convert_pos and so on for your other methods due to PEP8.

Don't keep global state. There are a few alternatives, a class being the easiest.

Separate out your mouse handling from your drawing, and don't keep a clock or a "frame loop". You don't have any animations, so use an event loop instead. This is far less wasteful. In other words, 60 times a second, if absolutely nothing is happening from the user, the program should just wait for a new event instead of churning through hundreds of draw calls.

Add PEP484 type hints.

Add a __main__ guard.

Don't exit() on program termination - that isn't very nice to your callers; just return.

It's more typical to have y in your outer loop rather than your inner loop - this will produce iteration in the same pattern as a typewriter (left-right fast, up-down slow).

Suggested

import pygame
from pygame.event import Event

WIDTH = 800
SIDE = 200
HEIGHT = 400
MARGIN = 50
SQUARE_SIZE = 25
COLOURS = (
    "Black", "Blue", "Green", "Red", "Pink", "Yellow",
    "White", "DarkGreen", "Brown", "Grey", "Cyan",
)


def convert_pos(pos: tuple[int, int]) -> tuple[int, int]:
    x, y = pos
    return x//SQUARE_SIZE, y//SQUARE_SIZE


class Game:
    def __init__(self) -> None:
        pygame.display.set_caption("PXLART")

        self.screen: pygame.Surface = pygame.display.set_mode((WIDTH + SIDE, HEIGHT))
        self.pressed: dict[tuple[int, int], str] = {}
        self.draw_color = "Black"

    def draw_grid(self) -> None:
        for y in range(0, HEIGHT, SQUARE_SIZE):
            for x in range(0, WIDTH, SQUARE_SIZE):
                rect = pygame.Rect(x, y, SQUARE_SIZE, SQUARE_SIZE)
                pygame.draw.rect(self.screen, "Black", rect, 1)

    def draw_select_colour(self) -> None:
        background = pygame.Rect(WIDTH, 0, SIDE, HEIGHT)
        pygame.draw.rect(self.screen, "Orange", background)
        pygame.draw.rect(self.screen, "Purple", background, 5)

        for item, colour in enumerate(COLOURS):
            select_colour = pygame.Rect(0, 0, 120, 30)
            select_colour.center = (
                WIDTH + SIDE/2,
                HEIGHT/len(COLOURS)*(item + 0.5)
            )
            pygame.draw.rect(self.screen, colour, select_colour)

            if self.draw_color == colour:
                pygame.draw.rect(self.screen, "DarkBlue", select_colour, 5)

    def draw_square(self) -> None:
        mouse_x, mouse_y = mouse_pos = pygame.mouse.get_pos()
        grid_x, grid_y = convert_pos(mouse_pos)
        cursor = (grid_x*SQUARE_SIZE, grid_y*SQUARE_SIZE, SQUARE_SIZE, SQUARE_SIZE)

        for (x, y), color in self.pressed.items():
            square = pygame.Rect(x*SQUARE_SIZE, y*SQUARE_SIZE, SQUARE_SIZE, SQUARE_SIZE)
            pygame.draw.rect(self.screen, color, square)

        if 0 < mouse_x < WIDTH-1 and 0 < mouse_y < HEIGHT-1:
            pygame.draw.rect(self.screen, self.draw_color, cursor, 3)

    def handle_mouse(self, pos: tuple[int, int], left: bool, middle: bool, right: bool) -> None:
        mouse_x, mouse_y = pos
        if 0 <= mouse_x < WIDTH and 0 <= mouse_y < HEIGHT:
            grid_pos = convert_pos(pos)
        else:
            grid_pos = None

        if left:
            if grid_pos is None:
                for item, colour in enumerate(COLOURS):
                    select_colour = pygame.Rect(0, 0, 120, 30)
                    select_colour.center = (
                        WIDTH + SIDE / 2,
                        HEIGHT / len(COLOURS) * (item + 0.5)
                    )

                    if select_colour.collidepoint(pygame.mouse.get_pos()):
                        self.draw_color = colour
            else:
                self.pressed[grid_pos] = self.draw_color

        elif middle:
            self.pressed.clear()

        elif right:
            self.pressed.pop(grid_pos, None)

    def draw(self) -> None:
        self.screen.fill("White")
        self.draw_grid()
        self.draw_select_colour()
        self.draw_square()
        pygame.display.update()

    def run(self) -> None:
        while True:
            event: Event = pygame.event.wait()

            if event.type == pygame.QUIT:
                return

            if event.type == pygame.MOUSEBUTTONDOWN:
                self.handle_mouse(event.pos, *(
                    event.button == b for b in (
                        pygame.BUTTON_LEFT,
                        pygame.BUTTON_MIDDLE,
                        pygame.BUTTON_RIGHT,
                    )
                ))

            if event.type == pygame.MOUSEMOTION:
                self.handle_mouse(event.pos, *event.buttons)

            if event.type in {pygame.MOUSEBUTTONDOWN, pygame.MOUSEMOTION, pygame.WINDOWSHOWN}:
                self.draw()


if __name__ == '__main__':
    Game().run()