Pakistan Textile Exporters Warn of Sharp Export Decline, Seek Duty Drawback and Financing Relief
Pakistan Textile Exporters Warn of Sharp Export Decline, Seek Duty Drawback and Financing Relief
Pakistan's textile exporters have warned of a steep fall in goods exports in the October-December quarter of the current fiscal year. They cite weaker demand in Western markets, higher freight charges and rising production costs, and are asking the government for temporary support.
In a statement issued on Sunday, Pakistan Textile Exporters Association Patron-in-Chief Khurram Mukhtar said the export sector is under pressure from several directions at once, putting its competitiveness and share of international markets at risk.
Demand, freight and cost pressures
Mr Mukhtar said inflation in Western markets has dampened demand from international buyers. Sea freight rates, he said, have risen by 1.5 to 2.5 times, further squeezing already thin profit margins. Higher input and logistics costs are also weakening the competitiveness of Pakistani products.
He described the fall in export volumes as unprecedented and warned that only financially strong exporters would survive current conditions. Winning back lost market share, he cautioned, would be extremely difficult.
The slowdown is being felt across the textile value chain, including ginning, spinning, weaving, processing and knitting, he said. Weak domestic demand amid high inflation has added to the financial strain on several segments.
Demands on duty drawback, refunds and energy tariffs
Mr Mukhtar urged the government to offer temporary relief through the Duty Drawback of Local Taxes and Levies scheme at a rate of 6 to 8 per cent, so that exporters can hold on to their international market share. He also called for immediate clearance of outstanding refunds under various heads to ease a liquidity crunch across the supply chain, and for the removal of cross-subsidies built into industrial energy tariffs.
Concerns over Export Finance Scheme
Mr Mukhtar also raised what he called anomalies in the Export Finance Scheme (EFS). He said the FY27 Finance Bill announced a fixed financing rate of 4.5 per cent, but this has not yet been implemented. According to him, banks are charging exporters at least 5.5 per cent, and some as much as 8.5 per cent.
He claimed that about Rs200 billion has been extended under the scheme to yarn exporters even though yarn is on its negative list. He also questioned why financing was being provided to sugar exporters, describing sugar as a highly regulated sector.
At the same time, he said, eligible textile exporters whose performance far exceeds the State Bank of Pakistan's mandatory requirement are being refused allocations. Some achieve five to six times the required export performance, against a mandatory threshold of two times, yet cannot obtain financing. Mr Mukhtar argued that this discourages value addition and penalises exporters who contribute heavily to foreign exchange earnings.
He welcomed the increase in EFS allocations for small and medium enterprises (SMEs) but questioned whether the extra funds could be used effectively. An additional Rs300 billion allocation for SMEs would require export performance of Rs600 billion, which does not currently exist, he said. He also noted that the Rs100 billion allocated for SMEs in the previous fiscal year lapsed unused.
Mr Mukhtar called for EFS financing to be distributed according to each segment's export contribution. He said the top 100 exporters account for up to 60 per cent of total export volume and should receive proportionate financing.
Proposed Rs140 billion modernisation package
To strengthen the supply chain, Mr Mukhtar proposed a targeted Rs140 billion financing package for the modernisation and technological upgrading of four segments. It would allocate Rs20 billion each to ginning and sizing, and Rs50 billion each to weaving and processing.
He said these sectors need specially designed short- and long-term financing for balancing, modernisation and machinery replacement, as well as for improving productivity and introducing automation and sustainable production methods. The federal government and the State Bank, he said, should develop the programme jointly in consultation with industry representatives.
Call for a 10-year export plan
Mr Mukhtar also called for a 10-year strategic plan for textile exports, built on Pakistan's existing industrial expertise, exportable surplus and the structural reforms needed to improve competitiveness.
He said the country has historically been reactive, and that the present situation calls for a proactive approach. Acting in time, he warned, would cost far less than trying to recover lost export markets later.