Textile and clothing exports from Pakistan contracted by 3.09% in the first month of FY25, reflecting the sector’s struggle to compete with regional rivals amid the implementation of harsh taxation measures. This downturn signals a challenging period ahead for the industry, which is grappling with high energy costs and government policies that have sparked concerns among top textile exporters.
Impact of New Tax Measures
According to the latest data from the Pakistan Bureau of Statistics (PBS), the decline in textile and clothing exports is directly linked to the government’s recent budget measures. These include increased tax rates on exporters’ personal income, which have raised concerns within the industry. The July export results show the immediate impact of these new tax measures, coupled with the highest-ever energy costs, which have burdened the sector.
Textile and clothing exports, which represent over 60% of Pakistan’s total exports, experienced a negative growth of 0.93% in June, followed by a more significant decline in July. Despite a rebound in May, where exports grew by double digits after slowing in the previous two months, the sector is now facing a downturn, with structural issues hampering its performance.
In absolute terms, textile and clothing exports fell to $1.27 billion in July, down from $1.31 billion in the same month last year, marking a 10.13% decrease on a month-on-month basis.
Breakdown of Export Performance
The PBS data provides a detailed breakdown of the export performance in July:
- Readymade Garments: Exports rose by 7.57% in value and 8.47% in quantity.
- Knitwear: Exports dipped by 1.88% in value and 6.37% in quantity.
- Bedwear: Exports posted a negative growth of 1.20% in value but grew by 4.07% in quantity.
- Towels: Exports decreased by 3.67% in value and 2% in quantity.
- Cotton Cloth: Exports declined by 0.56% in value and 4.72% in quantity.
- Yarn: Exports saw a significant dip of over 42.54% compared to July of the previous year.
- Made-Up Articles (excluding towels): Exports declined by 5.84%, while tents, canvas, and tarpaulin exports increased by 14.22%.
Imports: Oil and Mobile Phones
In contrast to the export performance, oil imports saw a dramatic increase in July, rising by 60% to $1.26 billion from $0.791 billion in the same month last year. Petroleum product imports surged by 39.94% in value and 36.89% in quantity. Crude oil imports experienced an unprecedented rise, with quantity increasing by 626% and value by 687%.
On the other hand, mobile phone imports dipped by 5.30% in July, marking a significant development in the government’s efforts to conserve foreign exchange. However, imports of other mobile apparatus grew by 69.45% during the month.
Conclusion
The contraction in textile and clothing exports is a concerning development for Pakistan’s economy, particularly given the sector’s significant contribution to overall exports. The industry faces multiple challenges, including harsh taxation measures, high energy costs, and structural issues that have kept exports stagnant over the past two years. As the impact of these factors continues to unfold, the textile sector will need to adapt and innovate to regain its competitive edge in the global market.