Despite pandemic, global demand for Pakistan textile to remain strong

Pakistan's textile sector kicked off FY22 with a strong show, as textile exports witnessed double-digit growth in the month of July.

The strong growth figures, despite the slowdown posed by the Covid-19, have come as a welcome development as Pakistan eyes higher foreign exchange receipts.

Analysts say this is a testament to the strong demand for the country's textiles in the global market, adding that they believe the growth momentum would continue in the coming months.

“We believe that the demand for Pakistan’s textiles globally is likely to remain strong due to continued rerouting of orders out of China and other regional Asian countries,” wrote Abdul Ghani Mianoor, an investment analyst at Intermarket Securities, in a recent report.

“The capacity enhancements by various textile exporters is an indication of strong order flows, while exports’ competitiveness is also supported by recent PKR depreciation, the continued rationalisation of imports tariffs on raw materials and power subsidies from the government.”

Textile exports decline 11.32pc MoM

As per the Pakistan Bureau of Statistics (PBS) latest figures, Pakistan’s textile group exports declined by 11.32% on a month-on-month basis and remained $1.471 billion in July 2021 compared to a record-setting $1.658 billion in June 2021.

However, textile group exports have witnessed a growth of 15.61% on a year-on-year basis and remained $1.471 billion in July 2021 compared to $1.272 billion in July 2020.

The analyst added that a renewed focus on value addition may also allow for organic growth in exports in the coming months, whereas the arrival of the new Textile Policy will further ensure sustained competitiveness of the sector, “and will be another impetus for Textile stocks.”

AKD Securities in its latest report also considered the depreciation of PKR as a positive for textile exports.

“Exports occupy 72% share in total sales of our textile sample universe where bouts of devaluation increase price competitiveness of these players resulting in stronger volumes while net positive dollar exposure translates into exchange gains,” it said.

Pakistan needs higher exports to ensure its trade deficit remains manageable. As the government targets faster economic growth, it is likely to put pressure on Pakistan's import cover.

Hence, stakeholders and policymakers are looking to promote the country's exports as well as other earners of foreign exchange to ensure the deficit remains under control.