DOES any such initiative exist in our country, or is it a figment of my imagination? For sure, there is an initiative for remittances — but not for exports. One wonders about the presence of one and the strange absence of the other.
Exports are stagnating, and remittances are rising. Are exports falling because of unwise policies or despite them? Are remittances rising because of good policy initiatives or despite them?
The point here is not to denigrate the remittances initiative or its continually renewed push, but to emphasise that exports should be given greater policy priority than remittances — because, in some growth-promoting way, exports matter far more than remittances. Here we explore the reasons.
This article focuses on increasing exports, not reducing remittances. In fact, remittances should continue to be promoted. Both exports and remittances matter to our economy. Both help contain the current account deficit.
Exports are driven by agricultural, industrial, and services output — sectors that already provide a direct impetus to employment in the country. This impetus also has an indirect impact on the economy through spending by household members employed in export industries.
Remittances follow increased output in foreign countries that employ Pakistani workers and pay them abroad. Part of their overseas earnings/ savings is sent home to their families.
The economic impact of remittances is indirect and arises from spending by remittance-receiving families. Hence, both help fill the gap in the current account, but the growth impact of exports is both direct and indirect, while it is only indirect for remittances.
Another, far more crucial point is that increasing exports to raise the economy’s productivity is paramount for growth. This is not true for rising remittances in Pakistan, although it is theoretically possible if a larger proportion of remittances goes towards export production.
Our policymakers seem to have forgotten the importance of exports. A policy to increase exports is more likely to raise productivity than a policy to increase remittances. Increased productivity can fuel long-term sustainable growth. Exporting exposes domestic firms to international competition, better management practices, international quality standards, global supply chains, and new technologies. There is considerable empirical evidence that exporters tend to be more productive and that export expansion can generate productivity gains. For example, the World Bank reports that a 10 per cent increase in exports across its cross-country sample was associated with higher employment, earnings, and productivity.
Another point to note is that exports are always preceded by the actual rise in production and employment (direct impact), as well as the indirect impact through consumption made possible by spending of wages by export-related employees. Contrast this with remittances, whose economic impact is not only indirect but also follows the receipt of remittances.
This means that prioritising sustained export growth would create more employment in the country and reduce the desperation of unemployed people pushed abroad to find jobs, even at the risk of their lives. At the same time, increasing exports would have boosted the productivity our economy so badly needs. This is why remittances should not be seen as a substitute for exports. Exports should be promoted with more vigour than remittances.
In terms of promoting growth, exports matter far more than remittances.
Our analysts tend to blame high unemployment almost entirely on high population growth. The fact is that our unwise economic policies are at the root of frequent economic crises that cause growth and productivity to decline. The resulting rise in joblessness leads to greater migration abroad, which, in turn, drives remittances up. Of course, Pakistan’s remittance initiative has helped. But if we had implemented prudent policies that avoided various crises, exports as a proportion of GDP would have risen much faster than remittances.
The export-to-GDP ratio peaked at 17.3pc in 1992 (according to World Bank data). It went down to only 10pc of GDP in 2025. The trajectory of the fall was not linear. Every onslaught of a balance-of-payments crisis precipitated a large decline. It fell to 9.6pc of GDP in 2000 in the wake of the 1998-99 crisis. With more prudent policies after the crisis, it recovered somewhat — only to decline again when imprudent policies followed, leading to other crises between 2000 and now.
In contrast, our remittances have been rising almost consistently during this period as a proportion of GDP. Remittances dipped from 3.2pc of GDP in 1992 to 1.1pc of GDP in 2000, then rose to 9.9pc.
The presence of a falling trend in exports and a rising trend in remittances indicates that exports always respond positively to prudent economic policies, while remittances largely show autonomous growth.
Refinements in the banking infrastructure have indeed helped to increase remittances, but economic policies also played a role that pushed people into boats to find employment abroad. Subsequent remittance growth has largely occurred despite these economic policies.
Pakistan’s export potential is much higher than its current level suggests. The simplest way to estimate what the level of exports could have been in 2026 is to assume the export-to-GDP ratio of 1992 (17.3pc). This translates to exports valued at $78bn, compared with the actual export value of $41bn (FY26 State Bank data).
Frequent balance-of-payments crises in our country seem to have clouded the thinking of our policymakers. When they think about exports or remittances or even foreign investment, they only think in terms of foreign exchange earnings or inflows that fill a gap in the balance-of-payments.
Constant firefighting and pressing short- and mid-term foreign financing needs have created a policy psyche that is obsessed with mobilising foreign exchange liquidity and has forgotten productivity and growth. Exports are badly in need of an initiative based on collective policy expertise in the country.
The writer is a former deputy governor of the State Bank of Pakistan.
Published in Dawn, October 25th, 2026