Pakistan’s Largest US Dollar Earning Sector Is in Big Trouble

Pakistan’s textile industry has urged Prime Minister Shehbaz Sharif to introduce immediate policy measures to address rising production costs, financing constraints and a worsening cotton shortage.

In a letter to the prime minister, the Pakistan Textile Council (PTC) said textile and apparel exports remained virtually unchanged during FY2025-26, increasing just 0.26 percent to $17.93 billion from $17.88 billion a year earlier.

The council also highlighted a sharp slowdown in June, when textile exports fell 17 percent year on year and 23 percent month on month, marking their lowest monthly level in 14 months.

The appeal comes as Pakistan’s overall exports fell 6 percent during FY2025-26, while imports rose to a four-year high, increasing pressure on the country’s external account.

The PTC identified three major challenges facing exporters: high production costs, delays in implementing the expanded Export Refinance Scheme announced in the FY2026-27 federal budget, and a deepening domestic cotton shortage.

According to the council, Pakistan’s cotton production has fallen to around 5.5 million bales, compared with a peak of 14.8 million bales in 2011-12, forcing the industry to rely increasingly on imported cotton. It attributed the decline to climate-related challenges, water shortages and reduced farmer confidence.

To improve competitiveness, the PTC recommended:

• reducing employer EOBI contributions to 2 percent
• revising industrial electricity tariffs to better reflect actual costs
• immediately operationalising the expanded Export Refinance Scheme, and
• treating the cotton sector as a national priority through measures such as support prices, improved seed varieties, protection of cotton-growing areas and more realistic production forecasting.

PTC Chairman Fawad Anwar said the industry was seeking a competitive business environment rather than protection.