The thing about economic indicators is they can tell whatever story the narrator wishes to sell. A quick look at latest current account balance would indicate that Pakistan’s economy has achieved hard won stability, with 9M fiscal year current account deficit at its lowest since early 2015. An eternal pessimist, however, might point to the performance of textile exports, which on a 12-month rolling basis are at their lowest in 18 months.

So which number should independent observers put their faith in? That depends on the type of answer you are looking for. If you are sick of the news pieces and vlogs predicting “Pakistan’s economy imploding”, the current account numbers might be your preferred vice. The latest snapshot of the current account confirms beyond a shadow of doubt that fears of balance of payment crisis have subsided. Foreign exchange reserves of the central bank have increased by 2.2 times over the last ten months, making forecasts of Pakistan defaulting on its external debt obligations – recurrent headlines till just six months ago – appear almost laughable (in retrospect, of course). But if you are willing to dive even slightly deeper, that hard won confidence might unravel fairly quickly.

The economic stabilization witnessed over the last six to ten months in effect stands on two pillars: the stabilization in exchange rate since September 2023, and a stellar performance by food exports segment. Take away either, and the edifice would collapse almost immediately, tall tales of IMF wooed notwithstanding. Those of weak faith can’t help but ask what is keeping the exchange rate stable (in fact, ten percent lower since Aug-2023) when exports are virtually at a standstill. And if you are one with no faith at all, you can’t help but wonder: what happens to the outstanding growth in food export when Indian rice exports enter the fray next quarter?

Remember, Pakistan’s food exports doubled between Aug and Dec 2023, and are currently 51 percent higher than the previous year. However, this performance is almost fully attributable to growth in export of primary commodities: rice, sesame, and corn – which could quickly return to last year’s levels if either the weather or global prices turn unfavorable. Global commodity prices are already receding, and exporters can only withstand unfriendly movement in exchange rate for so long, a phenomenon already visible in corn and sesame. Meanwhile, the jump in rice exports is all thanks to Mr. Modi’s re-election jitters, who banned rice export last year in a bid to restrain food inflation at home in the run up to general elections 2024.

Which brings us to the anti-hero of this story: textile exports. Whichever way you wish to look at it, textile exports are at a standstill, and will not resume growth unless there is a breakthrough in energy tariffs. If you have been sold the lie that industry exports have bottomed out and can only rise from hereon, look no further than the trends in export bill discounting, which are at their lowest level since the pandemic (on 12 months rolling basis). Granted, bill purchases have recovered since August 2023 when the exchange rate had bottomed out. But these have since plateaued, most likely indicating that whatever gains could be made from currency stability have now been long exhausted. If you have come to believe that agricultural exports can replace the lost opportunity in textile exports, this section is barking up the wrong tree.

So, what does macroeconomic outlook look like? Depends on the question you are asking. Has macroeconomic stabilization on the external front been achieved? Yes. Is Pakistan going to default on its external obligations in the near term? Most certainly not. But change the question, for example, to whether exports are now on solid footing? No. Could Pakistan withstand an external shock ala February 2022, such as a war breaking out in Middle East, oil prices rising, or a capital flight to safety? Most definitely not.

The members of the monetary policy committee should pay hard and close attention to these questions before rolling out the ‘Mission Accomplished’ banner, come next Monday.