The export performance report card for May 2024 threw a surprise. Monthly export proceeds realization (SBP) was recorded at just a little over $3 billion, a first in two years. Monthly export earnings recorded a 14 percent rise over the preceding month, and a 17 percent increase year-on-year, reflecting the robustness of the upswing.

Pakistan’s annual goods export earnings have averaged a little above $30 billion over the last three years. Unfortunately, it appears that in the post-Covid world. Goods export performance has plateaued around a new psychological barrier, having averaged at $24 billion for most of the decade leading up to the pandemic. It is almost as if goods exports recorded a one-time adjustment of 25 percent – most of it attributable to the unleashing of inflation globally – in a short period and have once again run into an upper limit.

For a short period during H2-FY22, it appeared as if goods export earnings would breach the next barrier and leap forward by another 20 percent – or $36 billion annually – when monthly export earnings averaged $3 billion for three months beginning March 22. That mirage, however, soon ended, with monthly export earnings clocking in above $3 billion for the first time since then.

But is the growth here to stay? In fairness, the headline monthly export number has demonstrated stability in the face of adversity for at least the last eight months, coinciding with the currency finding a new ceiling at Rs 280 per US dollar (or thereabouts). Export earnings have noted a monthly run rate of $2.7 billion, which when annualized projects 12MMA revenue against goods export of $32 billion. However, it is also true that the export performance during these eighth months has been widely attributed to seasonal and one-time factors, including in this space – chief among them being the rice export bonanza which peaked on December 23 and is now in remission. To the surprise of most commentators, the performance during May 2024 bucks this trend.

How? The general assumption thus far this year has been that Pakistan’s total goods export minus food exports have actually flat-lined, with much if not all of the upswing during the current fiscal attributable to key food commodities of rice, corn, sesame, vegetables, and red meat exports. Textile group exports are in fact at a three-year low, with over one and a half billion dollars of export earnings cumulatively wiped out in just five key segments of knitwear, bedwear, denim fabric, woven garments, and towels, respectively – against the peak year performance during 2021-2022. Although volumes have returned in some key segments – for example, in knitwear and home textiles – export earnings are still below the peak performance. Meaning that firms will have to export that much more to regain lost revenue. Meanwhile, food export earnings are now in remission, as rice export season comes to a close.

There are, of course, some explanations. The first, of course, is that the meteoric rise on May 24 just averages out the lost revenue for the preceding month – which coincided with Ramzan and Eid-ul-Fitr. Businesses had to catch up to meet deliveries on orders committed, and the May performance is just clearing up that backlog. But Apr-24 wasn’t particularly on the lower side, in fact, recording just a little higher compared to both the preceding month’s exports and the average of the preceding three months.

Importantly, the export rise was not at all predicted based on the foreign bill discounting index, which has remained flat-lined at $770 million since Oct-23. Considering that the popular discourse suggests that the exchange rate is overdue for an upward correction right before the new IMF program is approved, exporters preponing their proceeds realization makes that much less sense.

Which only begs the question? What drove the export rally in May 24, and is it here to stay?