The All Pakistan Textile Mills Association (Aptma) believes export proceeds of the textile sector will go down by up to $3 billion in the current fiscal year because of the government’s policies that have “strangulated” the largest dollar-earning sector of the economy.
Aptma Secretary said “I can’t see us getting out of this perfect storm. It’d be a miracle if we’re able to retain our exports at the current level,” while speaking at a seminar organized by the Pakistan Institute of Development Economics on Thursday.
According to the Pakistan Bureau of Statistics, Textile exports increased about 26 percent to $19.3bn in 2021-22.
Mr. Sattar said the textile sector performed “pretty well” in the last two years as its foreign earnings increased by roughly $7bn. However, he said he’s become a “big skeptic” with regard to the immediate future of the textile sector given the severity of its working capital crisis.
The national currency has lost more than two-thirds of its value of late, which means the pre-existing limits on textile mills’ working capital have become redundant. “Exporters are facing huge issues in financing the export cycle, which lasts four to six months. You need double the amount of currency now to finance that cycle,” he said while criticizing the sales tax that’s meant for domestic sales but results in mopping up liquidity from the export-oriented segment of the textile sector.
“You collect Rs300-350bn a year and retain up to Rs60bn (and refund the rest). This has soaked up liquidity. The Export Finance Scheme just doesn’t cover the lack of working capital. How can our exports grow if we don’t have working capital?” he said.
He criticized the government for failing to supply gas and electricity to the textile units that have recently been either upgraded or built anew using the subsidized loans under the Temporary Economic Refinance Facility (TERF).
“We invested heavily through TERF in new plants and machinery and upgradation, But they’ve not been given the energy that they need to operate on. All these people who expanded their operations are now in fact cursing me, saying the expansion isn’t being utilized. Who will service these debts?”