The All Pakistan Textile Mills Association (APTMA), has sought “direct intervention” of the Federal Minister for Finance and Revenue Ishaq Dar as banks are not opening Letters of Credit (LCs) for the import of cotton, an essential raw material for the textile sector.
In a letter dated January 12, addressed to the finance minister, the association informed that the cotton crop for this year has clocked in at under 5 million bales, which is significantly lower that the amount the textile sector consumed i.e. 15 million bales last year, which indicates that approximately 10 million bales would require to be imported in order to retain exports at the same level as last year of $19.3 billion.
“Unfortunately, import of cotton has been severely restricted,” read the letter.
“Banks are not opening LCs or retiring cotton imports. The industry is running out of cotton stocks and as a consequence our mills have either shut down or will shut down in the near future if decisive and urgent action is not taken,” said APTMA.
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The association shared that banks are only willing to entertain very small and limited LCs for companies which are direct exporters.
“This excludes 80% of the basic industry and ignores the fragmented structure of the industry.
“It is absolutely essential that the raw material (cotton) be available to the entire sector so that the sector which exports 80% of its product does not come to a standstill,” it said.
APTMA said that exporters are turning away orders as they are unsure over the availability of raw material to fulfill the orders. “The damage to Pakistan would not only be lower exports this year but also the permanent shifts of the orders to other countries which would be very difficult to reverse,” it said.
The textile association shared that the estimated cost of 10 million bales of cotton at today's price is $4 billion which would translate to minimum exports of $12 billion, i.e. a gain of $8 billion.
“Import compression of exporting sectors which adds value and re-exports at a much higher value is counterproductive,” said APTMA.
“We seek an urgent appointment to apprise you of the critical severity of the situation and seek your direct intervention to correct the situation.”
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Pakistan's economy largely depends on textile exports for foreign currency and employment.
Pakistan's textile exports have started declining and APTMA earlier informed that they will clock in at below $1 billion per month for the rest of the year.