The statistics on the external balance of payments of Pakistan in 2023-24 were released last week by the SBP (State Bank of Pakistan). These statistics reveal a fragile position of Pakistan with regard to the external transactions, both in the current and financial accounts.

Of course, there has been much commendation of the extremely small size of the current account deficit. It is the lowest after 2010-11, when there was actually a small surplus. The year has ended with the deficit at only $681 million, not even equivalent to 0.2% of the GDP.

This would certainly have been a reason to celebrate if it had been achieved on the back of spectacular growth of exports and/or remittances. However, exports of goods and services have shown a moderate 9.6% increase. If the upsurge in rice exports of almost 75% is excluded, then all other exports combined have achieved a growth rate of only 5%. In fact, there has been a decline in textile exports of over 2%.

Workers’ remittances have been more buoyant, with a growth rate approaching 11%. But much of this growth is due to the ‘low-base’ effect. During 2022-23 the wide divergence between the open market and the official exchange rate had led to a big diversion of remittances to the hundi market.

This led to a drop in remittances received by the banks by over 12% in relation to the level achieved in 2021-22. It is worth noting that there has only been a partial recovery in remittances in 2023-24. They are still below the level of 2021-22 by over 3%.

The real reason for the big containment of the current account deficit is the big........

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