2018 was a year of challenges and
2018 was the year of turmoil and change for Pakistan with a
new government that took over charge in mid-2018 after the
conclusion of the fiscal year in June 2018. During the year
Pakistani rupee lost more than 6% of its value against US$ from
August 2017 to March 2018 and another 20% decline from March to
This currency devaluation should have translated into
enhanced exports. However, the resultant increase in exports was
much less than expected. Pakistan's textile sector was able to
achieve an increase of only nine percent to $13.53 billion for
the fiscal year 2017-2018 ending on June 30 2018, while Rupee
lost much 20 percent against the US dollar since December 2017
to the fiscal year end.
The export performance has not been encouraging from July
-December 2018. The textile sector remained unchanged in the
first six months of the fiscal year as compared with the
previous year despite massive devaluation of rupee of more that
28%. While the provisional statistics show that the value added
sectors of Readymade Garments and Knitwear showed growth
compared to the dismal performance of the yarn and fabric
exports. Knitwear sector was the only one to show a double-digit
growth of 19% in terms of quantity and 10.5% in terms of the
Readymade Garments showed a significant increase in the
quantities exports of 24% but with no change in terms of value.
Bed ware showed an increase of 11% in terms of quantity and only
3% in terms of value. The increase of export quantities come at
a price of unit value. There seems to be severe price pressure
from the customers who are well aware of the declining rupee and
demand and negotiate for lower prices negating the benefit of
Furthermore, the raw material import costs have increased
significantly due to the weaker Pakistani rupee. The energy cost
also increased particularly for the industry in the north due to
higher imported RLNG price post-devaluation. While being the
fourth largest producer of cotton in the world, the cotton crop
was a disaster this year staying closer to 10 million bales
leaving a shortfall of 5 million bales that need to be imported.
The prices of imported chemicals and inks have also increased
severely affecting the bottom line of the textile industry.
It will take a while for the industry to stabilise from the
sudden correction of the artificially overvalued Pakistani rupee
for several years. The over valued rupee allowed our industry
to lose its global competitive advantage while allowing
unfettered imports into the country which rose to as high as 50
billion US$. On the other hand, margins of the textile industry
are getting smaller due to the pressure to remain competitive as
evident from the declining unit value of exports.
It can be said that the devaluation has given our industry a
breathing space to consolidate and to be efficient in order to
be viable and competitive.
The textile mills are facing challenges to remain sustainable
to make the necessary investments in machinery. Investments are
made when cash surpluses are created, textile sector efficiency
didn't improve since there was no surplus created to invest back
in innovation and technology up-gradation. Industrialists tried
to survive utilizing all their resources and credit lines just
to keep their factories running.
If the new government is able to follow policies export-led
growth strategy, results will start showing soon. It will take
time to reach a 45 billion target over next five years it can be
said with caution that Pakistan's textile industry has started
moving in the right direction.