KARACHI: Pakistan’s cotton industry is on the upswing, as favorable weather conditions and increased planting efforts have generated a wave of positive sentiment, countering the challenges of last year’s catastrophic floods.
The floods, which affected more than 20 million people and damaged over 2 million hectares of crops, had a severe impact on the cotton production and exports, which are vital for the country’s economy.
According to the Pakistan Cotton Ginners Association (PCGA), the cotton arrivals in the country reached 10.8 million bales as of January 15, 2023, up by 16% from the same period last year. The PCGA also reported that the cotton production target of 14.5 million bales for the current season is likely to be achieved, as the crop has shown good quality and yield.
The positive start and robust arrival of cotton crop have spurred hopes for the textile sector, which accounts for more than 60% of Pakistan’s exports and employs more than 40% of the industrial workforce. Amid subdued textile demand and operational hurdles, such as gas shortages, rising cost of working capital, lower cotton arrivals and diversion of export proceeds due to uncertainty regarding exchange rate, the textile sector is looking for ways to improve its competitiveness and profitability.
During the previous fiscal year, Pakistan purchased cotton valuing at approximately $2.4 billion, while the average expenditure on cotton imports over the past five years has been around $1.8 billion. Given the current challenges with foreign exchange availability in the country, a successful harvest of abundant cotton crops could potentially offer significant relief to the import expenses.
However, the textile sector also faces some challenges, such as the recessionary fears in the west (particularly in the US and Europe), which have dampened the demand for textile products. The textile exports declined by 15% year-on-year to $16.5 billion in FY23, compared to $19.3 billion in FY22, while volumetric sales also declined by around 15% year-on-year. The government had set a target of $25 billion for textile exports for FY23, but the recent domestic and global challenges have dimmed the outlook.
The textile sector has urged the government to provide policy support and incentives to boost its performance and growth. Some of the measures proposed by the sector include reducing energy tariffs, providing export subsidies, facilitating access to finance, improving infrastructure and logistics, and enhancing trade diplomacy.
The cotton industry is a key pillar of Pakistan’s economy and a major source of livelihood for millions of farmers and workers. The industry hopes that with better crop prospects, policy support and market opportunities, it can overcome the difficulties caused by the floods and achieve sustainable growth in the future.