As a result of rising production cost and a depreciating rupee, many units in textile have shut down production in Pakistan – a development that can damage the country’s exports.
Reports suggest that around 150 spinning and weaving mills have been closed since the July, which, some estimates say, made two million people jobless directly or indirectly.
The situation is complicated with the shortage of dollars in the markets as the difference between the official interbank and open market rates is huge – around Rs7 to Rs9.
On Monday, the rupee traded in a band of 20 paisa in interbank trading and ended the day at Rs224.94 However, the money changers were selling the dollar for Rs231.78 to Rs234.09.
It means the huge gap between interbank and open market persists which is causing uncertainty in business circles and resulting in additional burden for them at a time when the black market rate has been hovering Rs250.
As far as the textile sector is concerned, the higher electricity prices coupled with the gas shortage is making the products too expensive in the market both locally and internationally.
It comes at a time when the demand for apparels and other textile products is on a decline as the consumers in main buyers – the North American and European countries – are resetting their priorities due to higher inflation and dwindling income.
Last week, it was reported that textile exports were down for the second consecutive month in November, as the country is also witnessing a massive decline of over 50 percent in foreign direct investment (FDI).
According to the Pakistan Bureau of Statistics (PBS), the textile sector exports dropped 18.15 percent to $1.42 billion from $1.736 billion in the corresponding month last year.
Meanwhile, the July-November period of 2022-23 [FY23] witnessed a 5.1 percent reduction in the textile exports to $7.36 billion against $7.76 billion recorded for the same period in FY22.
Exports of products like cotton cloth, knitwear, bedwear and towels decreased while readymade garments maintained the 2022 level.
However, the exports were up 4.7 percent over November 2021’s level of $1.357 billion – a healthy sign amid the depressing overall news.
The product-wise figures show that cotton cloth exports dropped by 25 percent to $153.7 million in November when compared with $204.85 million in the same month last year. The decrease stood at 9.45 percent over the previous month’s exports of $169.6 million.
However, knitwear exports were up 2.17 percent to $400.2 million, bedwear 2.45 percent to $222.5 million, towels 16.4 percent to $92.65 million and readymade garments 18.55 percent to $326.7 million when compared with October.
But knitwear exports declined 12.8 percent over the corresponding month of last year followed by bedwear 29.4 percent and towels 12 percent in comparison with November 2022. Exports of readymade garments were the same as recorded in November 2021.
It is a known fact that that the textile sector is Pakistan’s top exporter with an over 60 percent share in the country’s total exports. In FY22, total textile exports were at a record high of $19.35 billion after an increase of over 25 percent when compared with FY21’s figures of $15.4 billion.
However, reduced textile exports are a result of global trend where the much bigger $200 billion industry in India is also facing a crisis. The reason? Inflation which is making consumers in the United States, Europe and other big markets cut spending. Other top exporters like Vietnam too have witnessed reduced exports in recent months.