Pakistan’s rice exports reached the $2.1 billion mark in the first seven months of FY24, shooting past annual earnings for the full fiscal, 2022-23. Rice exports earnings have effectively doubled during Jul – Jan 2024, compared to the corresponding period for the last fiscal. There is little doubt that annual rice earnings for the current fiscal will cross the three-billion-dollar psychological barrier, one that has not been breached ever before in history.

In fact, rice exports during the current year are the primary reason why the goods exports segment has managed to rake in record earnings of $17.8 billion during the 7MFY24, driving past the previous peak goods exports of 7MFY22. Economy watchers would recall that was the last ‘good’ year of economic growth witnessed by the country - when goods exports for the full financial year reached $32 billion – before crashing down back to $28 billion the following year (FY23).

That’s not to say that rice exports will help reach breach a fresh record for the country’s full year export report card. Unfortunately, the 7MFY24 trend for textile exports indicates that the industry may struggle to maintain full year export earnings at even last year’s levels. Thus, incremental earnings of $1 - $1.5 billion dollars by rice exporters can only go so far in making up for lost revenue of nearly $3 billion by the leading export group (versus FY22). Remember, full year export earnings for textile and garments industry had risen to $19.5 billion during FY22, before three billion dollars were wiped off the following year, single handedly shrinking national exports by 13 percent.

However, that rice exports have managed this spectacular performance at a time of severe economic adversity does deserve some commendation. Remember, the exuberance in textile exports during FY22 had come on the back of highly industry-friendly business environment – from record low borrowing rates; a bonanza of concessional finance; energy tariffs matched with regional competitors; coinciding with the peak of post-covid global commodity super cycle.

On the other hand, rice exports have picked up at a time when borrowing rates in the country are at record level (and have been there for over a year); industry has witnessed frequent hikes in energy tariffs; and, when commodity prices – including that of rice – have begun to taper off in the global market.

Unfortunately, the driver behind the rice industry’s miraculous performance during the current fiscal will most likely fail to withstand the test of time. Contrary to BR Research’s earlier assessment, it is now likely that India would no longer lift the ban on exports during the current fiscal to manage domestic inflation, at least not until the general elections are held and the BJP government firmly in place (after a likely re- election). But if – and not when – the export ban is lifted (likely beginning next fiscal 2024-25), global rice prices – especially of South Asian origin – will collapse in a matter of weeks if not days.

What could make matters worse for Pakistan’s rice industry is if India takes too long to lift the ban, and instead opts to monitor the situation until harvest season till next autumn (Nov 2024). By then, Pakistani rice farmers would have planted greater acres of rice – in anticipation of another bumper year of exports, only to meet with weakened prices in the export market. Meanwhile, if the domestic economic situation continues to remain as precarious as it has been over the last 24 months – particularly high financing rate amid muted domestic demand – then the local rice industry could be looking forward to financial performance very different from that in the current year.

Here's to wishing the best performers of FY24 best luck for the next year!