The textile industry of Pakistan, a cornerstone of the country’s economy, has faced both growth and setbacks in recent months. In September 2024, textile exports showcased a promising year-on-year (YoY) increase of 18%, amounting to approximately USD 1.61 billion, compared to USD 1.36 billion during the same period last year. However, the month-on-month (MoM) comparison reveals a slight decline of 2%, reflecting some immediate challenges that the sector is grappling with.
Breakdown of Export Performance
The YoY growth in September was driven by significant increases in several textile categories. Cotton cloth exports surged by 15%, knitwear by 30%, bedwear by 25%, towels by 7%, and ready-made garments by an impressive 35%. This upward trajectory highlights the growing demand for Pakistan’s value-added textile products in the global market.
However, basic textile exports took a hit, falling by 13% YoY. The most significant drop was seen in cotton yarn exports, which plummeted by 54% YoY and 5% MoM. On the other hand, value-added and other textile exports showed robust growth, with value-added textiles up by 28% YoY and other textiles increasing by 19% YoY.
Cotton Arrivals: A Cause for Concern
A key issue that the textile sector is currently facing is the significant decline in cotton arrivals. As of October 3, 2024, cotton arrivals dropped by 59% YoY, with only 2.03 million bales reported compared to 5 million bales during the same period last year. Punjab saw a dramatic 65% YoY decrease, with only 0.72 million bales, while Sindh experienced a 56% YoY decline, recording 1.3 million bales.
This sharp drop in cotton production is attributed to various factors such as unfavorable climate conditions, pest attacks, and lower realized prices for farmers. The U.S. Department of Agriculture (USDA) has estimated that Pakistan’s cotton production for FY25 could range between 5 to 7 million bales, significantly lower than the previous year. This shortfall will likely increase the country’s reliance on cotton imports, which have already risen by 21% in 1QFY25, reaching approximately USD 148 million.
Challenges and Future Outlook
Despite the positive export figures, the textile sector faces significant headwinds. The ongoing decline in local cotton production poses a major challenge for the industry. The government has set an ambitious cotton production target of 15 million bales for FY25, but this target is unlikely to be met given the current circumstances.
Additionally, the sector is struggling with higher energy tariffs, which are squeezing profit margins. On a positive note, the upcoming holiday season in the West is expected to drive export demand, offering a potential boost to the sector. Moreover, as interest rates decline, the lower cost of financing could provide some relief to textile manufacturers.
While challenges remain, the resilience of Pakistan’s textile industry lies in its ability to adapt and capitalize on the growing demand for value-added products globally.