APTMA is in a celebratory mood as Pakistan’s textile exports have surged 26 percent to $9.4 billion in the 1HFY22. Year-on-year basis, Pakistan’s textile exports surged 17 per cent to $1.55 billion in January this year. The growth is being attributed to a shift in export orders from India and Bangladesh, as per a Business Recorder report. However, growth in textile exports is not confined to Pakistan alone. Even Bangladesh witnessed 41 per cent Y-o-Y increase in textile exports in January ’22 and 28 per cent in 1HFY22. The growth also resulted in the rise in value of textile exports from these countries

Shifting orders, currency adjustments boost exports

Over the last three years, yarn and cloth exports from Pakistan have declined while exports of knitwear and garments have increased. That is helping the country earn more foreign exchange. Pakistan is also benefitting from the shifting of global orders from China, currency adjustments and energy subsidies. According to an IGC study, gas and electricity subsidies are helping boost Pakistan’s domestic textile sales. They are also encouraging spinners and weavers to add more value to garments. This is boosting the exports of garments and knitwear items from the country.

The end of gas subsidy has made gas supply erratic in Pakistan, especially during winters. Though this has not impacted export volumes yet, it has caused certain production losses that may impact textile exports in future. To avoid losses, Pakistan needs to leverage the new investment-major share of both LTFF, and ERF. The country can take share from Bangladesh that offers cheaper transportation that may compensate for the energy cost disadvantage.

Textile stakeholder demand more gas subsidies

Spinners and weavers in Pakistan are demanding more gas subsidies as they are expanding operations. The country offers competitive advantage over Bangladesh due to lower freight costs. However, to continue growing its textile exports, the government needs to ensure uninterrupted supply of energy. It needs to speed up private supply in the LNG market. It has already initiated a proposal to construct a terminal and, is also working on certain practical supply solutions

The government can achieve external account stability by enhancing exports and making domestic industries competitive. It also needs to reduce its involvement in the energy market and encourage supply of low-cost fuel.