KARACHI: Pakistan’s textile factory owners on Friday called for prompt government action to rescue the industry and its exports after production activities dropped by almost 50 percent amid lack of raw material availability.
Pakistani industries, including textile and pharmaceutical firms, are fast slipping into a shutdown mode since they face an acute shortage of raw material after commercial banks stopped issuing Letters of Credit (LCs) for clearance of goods piling up at the country’s ports amid fast depleting foreign exchange reserves.
The country’s official forex reserves declined to $3.67 billion which is not even enough to cover one month of imports. The falling reserves are also exerting immense pressure on national currency which devalued by over 13 percent within this week.
“The textile industry is in the intensive care unit now and needs urgent steps for its recovery,” Muhammad Jawed Bilwani, chief coordinator for Value-Added Textile Forum, told Arab News. “The situation is alarming for the industry and its exports. The production is down to almost 50 percent while many small units have been shut down. We are even unable to find plastic bags for packing.”
Bilwani said the impact of the current situation would become clear in March and April when the exports would likely be half as compared to the previous year.
“We expect that the overall exports will be reduced by two to three billion dollars by the end of this fiscal year [on June 30],” he continued.
Pakistan’s textile sector exported $19.3 billion worth of goods during the last fiscal year, though it has already suffered seven percent decline and its exports stood at $8.7 billion during the first six months of the current fiscal year.
Industry owners say they face a shortage of processing machinery, special tags for value-added textile and, most importantly, cotton which is the main raw material.
“People are facing problem in procuring chemical dyes, machines and tags etc.,” Muhammad Babar Khan of Pakistan Hosiery Manufacturers & Exporters Association told Arab News. “Of course, the cotton and yarn are also unavailable due to extreme shortage.”
“The situation is alarming and nobody has any clue where it is heading,” he continued. “The inventory of mills is drying out as they cannot maintain stocks beyond two to three months due to the cost factor.”
Khan said the exporters had started receiving orders after improvement in the global market, but the current situation in Pakistan was making it difficult for them to fulfill their commitments.
After a big fall in cotton production following last year’s devastating floods, the textile mills had expedited the import of the commodity to meet local requirements.
According to estimates of importers and millers, around 100,000 cotton bales worth more than $300 million are stuck at ports and waiting for clearance.
Pakistan’s textile sector requires 14 million bales to meet its annual demand for domestic and export purposes. The sector is expecting to import around 6.5 million bales after a drastic cut in the cotton output.
“As cotton imports are waiting for clearance, local mills have expedited its procurement from local market which has jacked up prices,” Naseem Usman Osawala, senior cotton broker and analyst, told Arab News.
He informed that cotton rates in the local market increased by Rs1,000 to Rs1,500 per 40 kilograms this week, adding the dollar rate hike against the Pakistani rupee had also played a role in the price surge.