The textile sector which is an important pillar of Pakistan’s economy saw continued losses in 2023 and the future too does not seem promising thanks to the decline in cotton production this year. Unprecedented inflation, power crisis, and political and economic instability have led to the downturn. This is going to add to the problem of distressed livelihoods and hurt the country’s overall economy as the textile sector provides critical income to rural households and contributes to over 60 percent of export receipts.[1][2]
The unprecedented floods of 2022 still have had negative impacts on the cotton output this year as well. The domestic demand for cotton lint is around 15 million bales but the production is not going to be over 9.5 million.[3][4] The shortage of cotton has led to an increase in the price of the commodity, by almost 30 percent, said Cotton Ginners Forum chairman Ihsanul Haq.[5] This has driven the demand for imports of raw cotton from other countries.
Pakistan’s textile sector has already witnessed a 5 percent reduction in the first half of the year 2023-34 and the coming days do not seem positive either thanks to high power tariffs, and economic and political instability.[6] “We still have to see how the industry can perform in the remaining months, keeping in mind the high energy cost locally and stiff competition in international markets,” an executive of a Pakistani textile factory said.[7]
The textile industry fears about the potential losses it is going to incur this year. Besides high energy tariffs and power outages, the spiraling domestic inflation has become a major concern. “The industry is operating at a low capacity, almost 30 percent down, as we are facing high energy tariffs and increased load shedding,” said a prominent textile industrialist.[8]
The textile industry is crucial for Pakistan’s economy but it is struggling to remain afloat. Corporate consultant Sarfaraz A Khan said Pakistan’s textile industry was facing a tough business environment due to higher interest rates, absence of tax incentives, and increased energy rates. “Given the present situation, it seems increasingly likely that the textile sector may struggle to even sustain its current export volumes, let alone achieve unprecedented growth rates,” he said.[9]
The 116 percent hike in power tariff in just one year will not allow the textile industry to remain profitable in the international market, said Ijaz Khokhar, former Chairman of Pakistan Readymade Garments Manufacturers & Exporters Association. “With such high costs of doing business, how can we remain a profitable entity, especially for export markets,” he said.[10] Textile industrialists are facing problems in quoting their rates in the global market as they cannot fix production cost due to erratic energy prices in Pakistan.[11] Hamid Zaman, managing director of Lahore-based Sarena Textile Industries, said “Unfortunately, when you have political instability and things are not clear, and the policies of the government are reversed, this whole thing has gone into a tailspin,” he said.[12]
Pakistan has been witnessing severe political instability for the past two years, which has impacted the textile industry. Economic analyst Muhammad Sheroz Khan Lodhi said the textile sector was enmeshed in neglect and apathy by the Pakistan government. “The textile industry, which has been a crucial part of Pakistan’s economy since its inception, contributing significantly to the country’s GDP, employment, and exports, faces additional challenges due to the country’s struggling economy and prolonged periods of political instability,” he said.[13]
About 1,600 textile units in Pakistan have shut in the recent past, which rendered over 70,000 jobless. One such labourer named Sher Ali from Lahore said the textile factory he was working in went out of operation. “The manager blamed the country’s economy, rising costs of production, less demand for textile goods and so on. He used to say that there is nothing the bosses can do because the factory was struggling to keep up the operations,” he said.[14] The closure of textile units has had collateral damages as those working in the supply chain too lost their livelihoods.
[1] https://www.dawn.com/news/1806978#:~:text=LAHORE%3A%20Pakistan%20has%20so%20far,equal%20output%20during%202023%2D24.
[2] https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Cotton+and+Products+Annual_Islamabad_Pakistan_PK2023-0006.pdf
[3] https://www.dawn.com/news/1806978#:~:text=LAHORE%3A%20Pakistan%20has%20so%20far,equal%20output%20during%202023%2D24.
[4] https://www.dawn.com/news/1803973
[5] https://www.dawn.com/news/1803973
[6] https://profit.pakistantoday.com.pk/2024/01/19/textile-exports-reach-8-28b-with-5-decline-in-first-half-of-fy2023-24-pbs/
[7] https://tribune.com.pk/story/2453787/textile-exports-dip-5-in-h1-of-fy24
[8] https://tribune.com.pk/story/2453185/winters-freeze-textile-sector-growth
[9] https://tribune.com.pk/story/2450319/the-dream-of-200-growth-in-textile-exports
[10] https://tribune.com.pk/story/2453185/winters-freeze-textile-sector-growth
[11] https://www.nation.com.pk/09-Nov-2023/rising-energy-prices-leave-textile-sector-high-and-dry
[12] https://www.thedailystar.net/business/global-economy/news/pakistans-economic-woes-leave-textile-industry-tatters-3388086
[13] https://www.brecorder.com/news/40281203#:~:text=The%20textile%20industry%2C%20which%20has,prolonged%20periods%20of%20political%20instability.
[14] https://sputniknews.in/20231206/thousands-lose-jobs-in-pakistan-amid-textile-industry-crisis—-5721031.html