ISLAMABAD: Textile exporters are warning the government of a steep decline in goods exports during the October-December quarter of the current fiscal year, citing weakening demand in Western markets, rising freight charges and escalating production costs.
In a statement issued Sunday, Pakistan Textile Exporters Association Patron-in-Chief Khurram Mukhtar said the country's export sector faces mounting pressure from multiple directions, threatening its competitiveness and share in international markets.
Mukhtar said inflation in Western markets has weakened demand from international buyers, while sea freight charges have increased by 1.5 to 2.5 times, squeezing exporters' already thin profit margins. Rising input and logistics costs are further undermining the competitiveness of Pakistani products, he added.
"The decline in export trade volume is unprecedented," Mukhtar said, warning that only financially strong exporters would survive the prevailing conditions. He cautioned that regaining lost market share would be extremely difficult.
The declining exports are affecting the entire textile value chain, including ginning, spinning, weaving, processing and knitting, he said. The situation has been compounded by weak domestic demand amid high inflation, putting several segments of the industry under severe financial pressure.
Mukhtar urged the government to provide temporary support through the Duty Drawback of Local Taxes and Levies scheme at a rate of 6% to 8% to help exporters retain their international market share. He also demanded immediate clearance of outstanding refunds under various heads to ease the liquidity crisis across the textile supply chain and called for the removal of cross-subsidies embedded in industrial energy tariffs to reduce production costs.
Highlighting anomalies in the Export Finance Scheme, Mukhtar said the government announced a fixed financing rate of 4.5% in the FY27 Finance Bill, but the decision has yet to be implemented.
Banks are charging exporters a minimum of 5.5%, while some are charging as much as 8.5%, contrary to the announced rate, he said.
Mukhtar claimed that around Rs200 billion in financing has been extended under the EFS to yarn exporters despite yarn being on the scheme's negative list. He also questioned the provision of financing to sugar exporters, describing sugar as a highly regulated sector.
In contrast, he said, eligible textile exporters whose export performance exceeds the State Bank of Pakistan's mandatory requirement by a substantial margin are being denied financing allocations. Some exporters are achieving five to six times the required export performance against the mandatory threshold of two times, yet are unable to obtain financing, he said.
Such allocations discourage value addition and penalize exporters contributing significantly to the country's foreign exchange earnings, Mukhtar argued.
He welcomed the increase in EFS financing allocations for small and medium enterprises but questioned whether the additional funds could be effectively utilized. An additional Rs300 billion allocation for SMEs would require export performance of Rs600 billion, which does not currently exist, he said. The Rs100 billion allocation for SMEs in the previous fiscal year lapsed without being utilized, he pointed out.
Mukhtar urged the government to review the distribution of EFS financing according to the export contribution of each segment, arguing that the top 100 exporters account for up to 60% of total export volume and should receive proportionate financing.
To strengthen the textile supply chain, Mukhtar proposed a targeted financing package of Rs140 billion for modernization and technological upgrading of four major segments. The proposed package includes Rs20 billion each for ginning and sizing, and Rs50 billion each for weaving and processing.
These sectors require specially designed short- and long-term financing facilities for balancing, modernization and replacement of machinery, improving productivity and introducing automation and sustainable production practices, he said.
Mukhtar said the federal government and the State Bank should jointly develop the proposed financing program in consultation with industry representatives.
He also called for a 10-year strategic plan for textile exports, focusing on Pakistan's existing industrial expertise, exportable surplus and structural reforms needed to improve international competitiveness.
"Historically, we have been reactive. The current situation demands a proactive approach," he said, warning that timely intervention would cost considerably less than efforts to recover lost export markets.
