After the removal of Prime Minister Imran Khan through a successful motion of no confidence against the PTI government under the regime change plan on April 10, 2022, Pakistan has entered into major economic and political constraints in which the crisis in the textile industry is the biggest and it is increasing day by day.
It is a fact that Imran Khan’s economic policies were not that good, rather a mixed bag, but he deserves credit for at least one thing: he took a bold stand against international investment treaties, which give international institutions excessive power at the national level. It concluded 23 bilateral agreements which allow corporations to sue governments in unaccountable supranational tribunals. Instead, they believed that such disputes should be handled through local arbitration.
With the help of overseas Pakistanis, he has given direction to the country’s economy on account of his global fame, all the details of which are contained in the Economic Survey of Pakistan 2021-22 published by the current government during the budget.
In short, in the worsening political-economic crisis in Pakistan, the current situation of debt for the people, especially for the working class of Pakistan, with the depreciating currency rate, increase in the prices of petrol, gas, and electricity for the industrial and commercial people, it paints a very bleak picture, for those who have been forced to carry this burden for decades.
A recent World Bank report states that 34 percent of Pakistanis live on just $3.2 a day.
South Asia is one of the most populous regions in the world as an emerging market for textiles and apparel. It is blessed with advantages like the availability of abundant and cheap labor, water and other raw materials for the textile manufacturing process, large cotton production, proximity to growing markets, etc. Hence, the South Asian region has become a potential global hub for textiles. Countries like the USA, UK, and EU are heavily dependent on textile products imported from South Asian countries. South Asian countries like India, Sri Lanka, Pakistan, and Bangladesh benefited the most from the elimination of textile and apparel quotas from developing countries. However, due to this change, Maldives and Nepal lost a lot.
A major portion of textile and apparel exports go from South Asian countries to the United States and the European Union. It is very sad that Pakistan’s development in the textile sector in the last three years is unprecedented, and this entire development process was completely affected by the Regime Change project in the Asian countries, Pakistan is different from India. Exports were also on the rise, but now this industry is again on the cusp of the situation due to the political crisis.
The State Bank has recently increased the policy rate for the third time in a row to 15%, due to which the markup on bank loans has increased to 17%. In addition, the government has increased the cotton cess from Rs. 50 per bale to Rs. 250. There is a 400% increase in production cost which will affect our competitiveness in exports.
The textile sector had imported 500 billion rupees worth of textiles and other machinery at State Bank’s 4% concessional interest rate in the last two to three years, but due to the recent increase in markup, the financial cost of these companies has increased significantly, and additional working capital at 17% markup has been imposed.
The global recession has stalled Pakistan’s export orders worth about a billion dollars for denim and other textile products. According to APTMA, more than 300 textile mills in the country are close to closure due to load shedding of electricity and gas prices as well as high rates of petrol, electricity, and devaluation of Pak Rupee, due to which the textile exports are decreasing by 250 to 300 million dollars per month, the closure of these mills will cause a further increase in poverty and unemployment.
Under the IMF agreement, it is no longer possible for the government to supply gas and electricity to the export sector at subsidized rates, so from July 1, the government has increased RNLG gas rates from 6.5 dollars to 9 dollars MMBTU and electricity rates to 9 cents for the textile sector. Meanwhile, our competitor Bangladesh has also increased gas prices by 22%.
