KARACHI: Pakistan’s export performance has historically been shaped by macroeconomic conditions -- particularly exchange rate stability. Contrary to the common belief that currency depreciation boosts exports by making goods cheaper for foreign buyers, Pakistan’s experience tells a different story.
Export growth has been more robust during periods of currency stability, especially when paired with supportive policies and uninterrupted access to energy and raw materials. A notable example is the 2003-2008 period, when the rupee remained relatively stable, averaging Rs58-62 against the US dollar. During these five years, exports soared from $11 billion to over $19 billion -- a 70 percent increase. This boom coincided with broader macroeconomic stability, moderate inflation, consistent energy supply and strong global demand -- especially for textiles and apparel, Pakistan’s top export earners.
In contrast, from 2008 to 2013, the rupee depreciated from Rs62 to over Rs100 per dollar, yet exports stagnated around $24-25 billion despite a nearly 40 per cent devaluation. Structural issues, energy shortages, and global economic turmoil contributed, but the key takeaway remains: a weaker currency did not deliver a competitive edge.
This pattern continued in the past decade. Between 2018 and 2023, the rupee lost more than 130 per cent of its value, sliding from Rs122 to Rs285. Yet exports hovered between $23 billion and $31 billion, without a clear upward trajectory. In fact, exchange rate volatility often disrupts exporters’ cost planning -- many rely on imported inputs, particularly in garments, leather and chemicals.
Interestingly, in FY2024, exports rose over 7.0 per cent to nearly $30 billion -- despite a sluggish domestic economy and weak global demand. What changed? Relative macroeconomic calm in the second half of the fiscal year: the rupee stabilised, dollar availability improved, and import backlogs were cleared. This allowed exporters, especially in textiles, to regain confidence and ramp up production.
These trends challenge the assumption that currency depreciation automatically drives export growth. For Pakistan, it is stability -- not volatility -- that fuels competitiveness. A stable rupee gives exporters predictability in cost structures, enabling long-term planning and better working capital management. In contrast, depreciation without structural reforms only adds uncertainty, feeds inflation and undermines competitiveness.
If Pakistan maintains macroeconomic stability -- marked by a steady currency, low inflation, consistent policies, and reliable energy -- its export potential could grow substantially. With goods exports already reaching $30 billion, the country has the capacity to hit $40 billion and beyond, particularly through diversification into IT, food processing and engineering goods.
It is time to abandon the outdated view that currency devaluation is the key to export growth. Pakistan’s own history shows that it is not shocks to the currency, but sustained stability, that unlock true export potential. Stability, in this context, is not just prudent -- it is essential for growth.