2019 was a year full of challenges with
signs of stability and recovery
While 2018 was the year of turmoil and
change for Pakistan with the new government that took over in
mid-2018, 2019 was a year of increased input costs due to
continued depreciation of the Pakistani Rupee, as well as higher
energy cost. During this year, the Pakistani Rupee was 33% of
its value against US$ from July 2018 to June 2019 to a record
high of PKR 162.9. However, the momentum reversed from the
start of 2019-20 in July 2019; the Rupee gained 6% of its value
and was able to retain it. The Rupee has now been steady at
around PKR 154.
June 2019 was the year when ITMA, the
Olympics of the textile industry took place in Barcelona.
Despite the difficult situation faced by the economy a large
number of Pakistani decision makers attended the premium textile
machinery exhibition and showed interest in the latest
technology. However, due to the higher US$ / PKR parity, many
of the negotiated contracts did not materialize. Exports
continued to remain stagnant with a meagre 3% increase despite
the devaluation. The value added textile sector has continued to
show modest but steady growth during the first quarter of fiscal
year 2019-20 (July 2019 – Sept 2019). 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. Knitted garments and fabrics accounted
for 23% percent of total textile exports in the first quarter of
2019-20 with a growth of 11.4%. Readymade garments matched with
a growth rate of 11.4% accounting for 19% of textile exports in
the first quarter 2019-20.
It is encouraging that the value added
sectors have shown a continued increase in exports accounted for
60% of total textile exports in the first quarter. 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 the devaluation.
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 remained to be 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.
The stability of Pakistani Rupee was
absolutely necessary for a climate conducive to investment. If
it is evident that the current account deficit has declined and
the reserves are increasing. The IMF has acknowledged that
Pakistan had made "considerable progress in advancing reforms
and continuing with sound economic policies". Economic activity
in the country has "stabilised and remains on the path of
gradual recovery". It also noted that the current account
deficit had declined due to the "real exchange rate that is now
broadly in line with fundamentals".
In the current issue our readers will find
a comprehensive overview of Pakistan’s textile industry in the
annual Fact File. The review includes the current status,
industry’s performance and a competitive analysis. The data is
for the fiscal year 2018-19, from July 2018 to June 2019. In
the next few months we shall continue to update our valued
readers of the fast evolving conditions and developments.