Pakistan’s natural gas shortfall is wreaking havoc on the country’s export industry, and has stripped off $250 million worth of textile exports in December alone, reported by Bloomberg.
According to Bloomberg’s calculations, the amount of $250 million was about 20 percent of Pakistan’s textile exports last month, and added to the woes of an economy that is already plagued by rising inflation and a weakening currency.
The textile industry is essentially one of the country’s few economic wildcards that supplies everything from denim pants to hats in the United States and Europe. Local production notably increased by over six percent in the nine months leading up to March 2021, and the sector accounted for 60 percent of the total exports.
However, the month of December boded badly for the industry as mills in Punjab were forced to close for 15 days, which resulted in a loss of $250 million in textile exports, according to the Executive Director of the All Pakistan Textile Mills Association, Shahid Sattar. The province’s factories rely on regasified liquefied natural gas imports while domestic sources are redirected to other areas, he explained.
Sattar stated in an interview that the current prices of gas are exorbitant, and the supply gap is due to the Ministry of Energy’s ineptitude, which has jeopardized the future of Pakistan’s exports and economy. “Our history is littered with episodes of ‘stop-go’ growth caused by energy shortages and exorbitant costs, both of which are the result of mismanagement, he remarked.
Although the government restored gas supplies to the textiles sector, regular power outages continue to impede operations, according to Sattar. If the situation continues, the mills will only be able to operate at roughly 80 percent capacity, he warned.
While local LNG availability has dwindled in recent years, Pakistan has unfortunately emerged as a fast-growing importer of the fuel. Moreover, owing to worldwide shortages, the demand for LNG has increased, driving spot rates to levels that Pakistan cannot afford.
As Pakistan entered the winter, it filed an emergency tender in November 2021 to acquire extra LNG after suppliers backed out due to rising prices and heightened global demand. Gas merchant Gunvor also recently informed Pakistan that it would be unable to make a supply scheduled for 10 January 2022.
