Despite being in the sweet spot on the notable depreciation of the Pakistani rupee (PKR) against the US dollar, the textile exports will likely witness a loss of $1 billion in July 2022 due to the gas closure and Eid holidays. According to the government, the sector will not be provided gas from July 1, 2022, to July 8, 2022. Meanwhile, textile units will observe another shut down on the back of the upcoming Eid holidays. As a result, the sector which contributes more than 60% to the total exports of Pakistan will face daunting challenges in completing the export orders on time.
The decline in exports is not limited to only the company’s profitability and competitiveness but will force the cash-strapped government to borrow more dollars to fund the current account deficit. After touching a record high level in April 2022, Pakistan’s textile exports witnessed a fall of 5.6% in May 2022 to $1.64bn, owing to insufficient availability of LNG/Gas to the sector. In addition, the government has not yet settled the rate of the Regionally Competitive Energy Tariffs (RCETs) for the fiscal year 2023, which also requires to be settled at the earliest to maintain the regional competitiveness of the sector in the international market.
Earlier, Chairman of All Pakistan Textile Mills Association (APTMA) Abdul Rahim Nasir requested Prime Minister Shehbaz Sharif to announce competitive electricity and gas prices for the textile sector before June 30, 2022, at the earliest as the current tariffs lapsed on the said date. Such supply-side issues are the major bottlenecks for textile exporters to obtain notable gains from depreciating PKR as exporters cannot expand their capacity to produce export surplus and tap new markets.
In order to prevent this sector from downfall, the government needs to devise business-friendly strategies in a way that can unleash the existing potential. More specifically, the supply-side issues, such as the resolve of energy issues, will pave the way to achieve the government’s target of $35bn exports in FY23.
