Finance: Time to tread cautiously

Despite higher energy and interest rate costs and even amidst stagnant industrial output, Pakistan’s merchandise exports are growing — thanks to strong overseas demand, reduced bureaucratic impediments to export growth and a shift in export earnings from textiles to agricultural products and food. On the other hand, merchandise imports continue to fall despite the recent decline in the US dollar value against the rupee — thanks to effective bureaucratic and banking controls on foreign purchases and a visible fall in domestic demand as the economy refuses to grow fast enough to bolster demand. The merchandise trade deficit is falling, contracting the current account balance deficit and easing pressure on dollar demand. It is a small wonder, then, that the rupee keeps making modest gains in value day after day. But will this trend, witnessed in the first half of FY24 (July-Dec 2023 but more so in Oct-Dec), continue through the second half of the year (Jan-Dec 2024)? That’s a million-dollar question.