Devaluation of Pak Rupee and its
impact on textile exports
Pakistani Rupee has shown a steady decline since December
2017, having lost about 40% of its value. Is the situation
really as bleak as portrayed in the news? The press has not
reported any positive statement issued by the Ministry of
Industry and the Ministry of Textiles. Therefore the editorial
team of PTJ has analysed the latest export figures to come up
with some very different and interesting conclusions as
presented in the following analysis.
The decline of the Rupee started in December 2017 with a 5%
depreciation against US$ followed by 10% further depreciation
for a total of 15% by June 2018 before the new government had
taken charge. Since June 2018 the steady decline of Pakistan
Rupee has continued and by April 2019 Pak Rupee had lost another
15% for a total of 30% with an expectation of further fall in
the coming months before the announcement of the new budget in
June. The Rupee value is expected to stabilise around US$149 as
projected by the analysists. The deficit is already shrinking
due to a decline in the value of Pak Rupee.
Let us see how it translates in terms of the textile
industry’s performance. It would be logical to expect an
increase in the exports due to devaluation. However, the press
is reporting a decline in exports. Our analysis has revealed
that the raw material goods of raw cotton, cotton yarn and
fabrics have witnessed a decline, but the value added sectors
has succeeded in achieving increase in exports exporting both
quantities and values. The good news is that the situation for
our value added sector is not quite as bleak as portrayed by the
mainstream media. According to the latest provisional statistics
by the Trade Development Authority of Pakistan, the value added
exports have shown an increase both in terms of quantities as
well as value. The percentage increase in terms of quantities
exported is much higher than the value realised.
Value added sectors of knitwear (hosiery), ready made
garments, bedwear, made ups and tents and canvas have shown an
increase to 4.6% from July 2018 to April 2019 in terms of value.
Knitwear exports increased by 8.76% to US$ 2.4B, garments
exports increased by 3.21% to US$ 2.19B and home textiles
increased by 2.4% to US$ 1.9B. These are the most important
value added sectors that accounted for US$ 7.5B of exports. What
is even more revealing is that from July 2018 to April 2019 the
exports of ready made garments had a 30% increase in quantity
and knitwear witnessed 15.6% increase in terms of quantity.
Exports of bedwear in terms of quanity increased by 10%. Exports
of cotton fabrics that declined by 2.7% in value increased by
18% in terms of quantity exported. Synthetic textile exports
increased by 17.4% in terms of quantity while decreasing by 1.9%
The above statistics indicate that depreciation of Pak Rupee
has directly resulted in increased quantities of value added
textiles exports with lesser increase in terms of value
resulting in low unit values. It is evident that there is a
severe pressure on price of value added textiles. This is a sign
that the industry is trying to survive by all means possible
especially by offering lower prices vis a vis the competition.
However, in the long run this is not a sustainable situation.
The focus should remain on providing quality and higher value
textiles and garments rather than lower priced, lower quality