Pakistan Textile Exporters Seek 6% to 8% Support Amid Export Slump
In this article (4)
Pakistani textile makers face a steep decline in goods exports during the second quarter from October to December, driven by weakening Western demand, surging shipping costs, and escalating production expenses.
According to Pakistan Textile Exporters Association (PTEA) Patron-in-Chief Khurram Mukhtar, ocean freight charges have climbed by 1.5 to 2.5 times, severely squeezing profit margins.
The downturn is affecting the country’s entire textile value chain, from ginning and spinning to weaving, knitting, and processing, compounded by weak domestic demand amid high inflation.
Squeezed margins and export rebate demands
PTEA Patron-in-Chief Khurram Mukhtar said inflation in major Western consumer markets has depressed wholesale orders from international retail brands. Rising input costs and higher transport expenses have also hurt competitiveness. Pakistani apparel and textile goods now struggle against goods from regional manufacturing hubs across South and Southeast Asia.
To stop factory shutdowns and protect export volumes, the association wants an immediate temporary Duty Drawback of Local Taxes and Levies rebate of 6 per cent to 8 per cent. Exporters are also demanding the quick release of delayed tax refunds across government heads to resolve working capital shortages.
Mill operators also want authorities to eliminate cross-subsidies embedded in industrial electricity and gas tariffs. They say these surcharges push local production costs above regional rivals.
Financing bottlenecks hit textile supply chain
Credit access remains another friction point for garment suppliers. The federal government set a fixed 4.5 per cent financing rate under the Export Finance Scheme in the FY27 Finance Bill. Commercial lenders have not implemented the concessionary rate.
Banks continue to charge exporters borrowing costs ranging from 5.5 per cent to as high as 8.5 per cent. Mukhtar said approximately Rs200 billion in concessionary financing went to yarn exporters, even though yarn is on the scheme’s negative list. Sugar exporters also received allocations despite operating in a regulated sector.
“The federal government set a fixed 4.5 per cent financing rate under the Export Finance Scheme in the FY27 Finance Bill.”
Value-added garment producers that beat State Bank of Pakistan mandatory export volume targets by five to six times have been denied loans under the facility.
Allocations miss export volume reality
State planners increased credit allocations for small and medium enterprises by Rs300 billion, but industry groups say the qualification rules make the money unusable. Accessing that pool requires incremental export performance of Rs600 billion. Under current global demand patterns, that hurdle is unachievable.
A previous SME export allocation of Rs100 billion lapsed unused during the prior fiscal year for the same reason. Mukhtar urged the central bank to rebalance credit distribution to match actual trade performance. The country’s top 100 exporters account for up to 60 per cent of total export volume.
The decline in export trade volume is unprecedented,
Mukhtar warned that only the most resilient operators will survive current conditions. Lost international retail accounts will prove difficult to recover once global apparel sourcing desks shift contracts elsewhere.
Modernisation funding and ten-year strategy
Seeking to prevent broader factory closures, the association proposed a targeted modernisation financing package of Rs140 billion for technological upgrades across four production segments. The plan allocates Rs20 billion each for cotton ginning and sizing, alongside Rs50 billion each for weaving and fabric processing.
The funds would pay to balance, modernise, and replace aged machinery, deploy automation, and meet international buyers’ sustainability and resource-efficiency standards. Mill groups want the State Bank of Pakistan and the federal government to build this lending framework directly with trade bodies.
Beyond emergency relief, the association called for a 10-year strategic export blueprint focused on industrial surplus capacity and structural competitiveness reforms. The immediate test is whether the central bank enforces the 4.5 per cent lending cap before second-quarter export data registers the projected downturn.