After a challenging year in 2023, Pakistan’s value-added textile sector has demonstrated remarkable resilience in 2024. Export data reveals a return to pre-crisis performance levels, echoing the record-breaking achievements of 2022.
At the outset of the current fiscal year, projections for textile and apparel exports estimated a range of USD 15-16 billion for FY 2025. However, the latest export figures suggest a potential recovery to the export levels seen in 2022.
As the current calendar year ends, a sneak peek at value-added textile exports during CY 2024 indicates a strong finish, reinforcing optimism that CY 2025 might at least match the record levels of 2022, if not outperform.
In order to ensure a better year for exports in 2025, key actions are needed, including continuing gas supplies to captive power plants, reversing the withdrawal of zero-rating on local supplies, reducing industrial power tariffs, and boosting domestic cotton production to safeguard net exports.
Textile industry’s performance: a sneak peek into the 2024 calendar year:
Pakistan’s total value-added exports (knitwear, woven garments, and home textiles), which saw a 15 percent decline in the 12-month CY 2023 compared to CY 2022, are expected to rebound with a year-on-year growth of 13 percent in CY 2024 as the year closes on a positive note for the downstream industry.
A closer look at the numbers reveals that value-added textile exports have reached, or in some cases exceeded, the monthly levels seen in 2022.
Knitted garments outperformed 2022’s record in October 2024 (Figure 1a), while woven garments and home textiles came close to matching their 2022 peaks (Figure1b and 1c).
Despite remaining below the USD 500 million mark per month, knitted garment exports show potential to surpass this threshold if the current growth trend persists.
The bullish trend in Pakistan’s value-added textile exports can be attributed to a mix of demand-side and supply-side factors, including rising demand from the West for compliant suppliers, increased orders driven by the weak performance of regional peers, and a global demand surge fueled by easing inflation in the US and Eurozone.
If this momentum continues, Pakistan’s export growth could stay strong through 2025, further fueling the textile sector’s recovery and growth.
Global trade is projected to see an uptick in 2025:
Meanwhile, WTO economists forecast a 2.7 percent increase in world merchandise trade volume in 2024, recovering from the -1.2 percent contraction in 2023. This rebound is primarily driven by declining inflation in Pakistan’s key export markets, the US and Eurozone. Lower inflation has enabled monetary easing, setting the stage for increased economic activity and demand for imports, which boosts the outlook for Pakistan’s textile exports in these regions.
Building on 2024’s momentum, the global trade outlook for 2025 is even more optimistic, with world merchandise trade projected to grow by 3.0 percent, despite challenges like regional conflicts and policy uncertainty. Asia is expected to lead global trade, with export growth of 4.7 percent and import growth of 5.1 percent.
These global trends present a significant opportunity for Pakistan’s export sectors, particularly value-added textiles, to sustain their growth in 2025. With knitted garments already surpassing 2022 export levels and woven garments and home textiles approaching their peaks, Pakistan’s exporters are well-positioned to capitalise on the global recovery, provided that supportive policies are enacted to maintain competitiveness and ensure long-term growth.
Did Pakistan’s export gain ground amid Bangladesh’s setbacks?
While future demand for Pakistan’s exports from Western markets shows potential for growth, Bangladesh has also played a short-term role in driving Pakistan’s exports. Political unrest and labour disputes in Bangladesh caused some export orders, between December 2024 and March 2025, to be redirected to textile producers in Asia, including Pakistan. Although this redirection has provided short-term gains, other developments in Bangladesh could have long-term implications for Pakistan’s exports throughout 2025.
The Bangladesh Knitting Owners Association (BSCIC) has reported significant strain on the industry, with over 2,300 registered and unregistered factories struggling, many of which have closed in the past 18 months. An estimated 85% of BSCIC knit traders are operating at a loss. Bangladesh has already experienced a decline in knitted garment exports, dropping from USD 6.43 billion in the four-month period from July to October 2023 to USD 5.34 billion in the same period in 2024.
In contrast, Pakistan has demonstrated remarkable growth in value-added exports, with an overall increase of 21 percent during the same period (Figure 2a). This includes 19 percent growth in knitted garments, along with 25 percent and 20 percent growth in woven and home textiles, respectively, outpacing Bangladesh (Figure 2b).
Given that both Pakistan and Bangladesh share the same key markets for textile exports, this growth in Pakistan’s exports is particularly noteworthy and underscores its ability to perform well in 2025, contingent on protecting the full value chain and sustaining export momentum across all segments.
The grass isn’t always greener on the other side:
Although 2024 proved to be a strong year for downstream textile exports, it has been a setback for the upstream sector. Data indicates that Pakistan’s exports of cotton, cotton yarn, cotton cloth, and other intermediate goods are at their lowest in the past three years, even falling below 2023 levels. In 2022, exports of this group were valued at USD 3.5 billion, while in 2023, they decreased to USD 3.02 billion. However, in 2024, exports are expected to hover around USD 2.7 billion (Figure 3).
While value-added exports have driven overall growth, the decline in upstream textile exports may prevent total exports from reaching 2022 levels. Given this declining trend in exports of intermediate goods, total exports for CY 2024 are projected to reach USD 17 billion, with USD 13.4 billion from value-added textiles, USD 2.4 billion from intermediates, and USD 1.2 billion from other textile exports.
A word of warning—if the declining trend in intermediate goods’ production and exports continues due to withdrawal of zero-rating and rising energy costs, CY 2025 may not match even 2024 levels and could fall significantly below those of 2022.
As a result of these policy lapses, Pakistan is on the brink of facing an annual export loss of intermediates valued at USD 3 to 3.2 billion.
Based on our projections, value-added textile exports in CY 2025 are expected to remain consistent with CY 2024 levels, hovering around USD 13.3 billion (Figure 4a). However, the total export outlook hinges on the recovery of intermediate exports. If this downward trend continues, Pakistan’s total textile exports are projected to remain around USD 16.9 billion in CY 2025 (Figure 4b).
What lies ahead for exports?
Amid declining inflation, the SBP has reduced the policy rate by 750 basis points since July 2024, bringing it to 13 percent, offering some relief to the strained business community. This follows a challenging period when Pakistan faced a record-high policy rate of 22 percent for 12 consecutive months (June 2023–July 2024), which significantly pressured businesses. This strain was further exacerbated by the 2024 budget, which shifted businesses from a fixed tax regime to the normal tax regime, resulting in a cumulative tax burden of 39 percent, including the super tax.
However, with total exports rising by 8.7 percent (July-Oct 2024), driven by growth in value-added textile exports, recent data indicates signs of recovery in economic activity. Nevertheless, given the policy volatility in Pakistan’s economic landscape, the future still remains uncertain.
Market-based solution is the only sustainable solution:
To sustain the export momentum which is the only sustainable solution to Pakistan’s twin deficit problem, the government must foster an environment that promotes industrial activity rather than stifles it. Cutting gas supplies to Captive Power Plants is a counterproductive policy that not only jeopardizes textile manufacturing but also drives up gas prices for lifeline consumers, who have long benefited from cross subsidies provided by the industry.
Aligning Pakistan’s policies with international regulations through traceability and compliance:
Apart from addressing the power sector’s structural challenges, the government must prioritize enhancing Pakistan’s export competitiveness in international markets through compliance and traceability.
As textile value chains evolve, super-vendors - vertically integrated companies managing all processes across the value chain - are emerging as the future of global supply networks. Buyers are now seeking fewer, but more reliable partners, driven by rising trade tensions and ethical sourcing concerns.
Pakistan’s textile businesses are well-positioned to meet these demands, but their success depends on compliance with international regulations. To strengthen Pakistan’s position in global value chains, the government must operationalize the National Compliance Center and align with Western policies without any further delay. Traceability and adherence to environmental and labor standards must be ensured from cotton fields to finished garments, guaranteeing compliance at every stage and preventing the negative impact of ‘blaming and shaming’ on Pakistan’s textile exports.
Through establishing a comprehensive traceability plan, Pakistan will unlock a first-mover advantage in the region.
In conclusion, to sustain the export growth momentum of 2024 and beyond, securing competitive access to inputs—whether energy or raw materials—is crucial. Protecting all segments of the value chain is vital to avoid disruptions that could jeopardize overall export performance. Prioritizing compliance with international standards is equally important. The government must focus on export-led growth and sustainable solutions to fiscal mismanagement, rather than relying on short-term fixes.
As the current year comes to an end, the industry hopes for a policy-shock-free year and, most importantly, a Happy New Year for Pakistan’s export sector and overall economy.
Copyright Business Recorder, 2024