AGL 23.47 Decreased By ▼ -0.93 (-3.81%)
AIRLINK 106.11 Decreased By ▼ -3.18 (-2.91%)
BOP 5.17 Decreased By ▼ -0.12 (-2.27%)
CNERGY 3.66 Decreased By ▼ -0.01 (-0.27%)
DCL 7.80 Decreased By ▼ -0.20 (-2.5%)
DFML 44.19 Decreased By ▼ -0.11 (-0.25%)
DGKC 88.50 Decreased By ▼ -0.30 (-0.34%)
FCCL 21.75 Decreased By ▼ -0.24 (-1.09%)
FFBL 42.52 Increased By ▲ 0.24 (0.57%)
FFL 8.75 Decreased By ▼ -0.15 (-1.69%)
HUBC 147.80 Decreased By ▼ -3.90 (-2.57%)
HUMNL 10.25 Decreased By ▼ -0.10 (-0.97%)
KEL 4.34 Decreased By ▼ -0.11 (-2.47%)
KOSM 3.79 Decreased By ▼ -0.16 (-4.05%)
MLCF 36.40 Decreased By ▼ -0.20 (-0.55%)
NBP 49.30 Increased By ▲ 0.14 (0.28%)
OGDC 130.85 Decreased By ▼ -0.85 (-0.65%)
PAEL 25.95 Decreased By ▼ -0.36 (-1.37%)
PIBTL 6.05 Decreased By ▼ -0.02 (-0.33%)
PPL 114.55 Decreased By ▼ -0.90 (-0.78%)
PRL 22.60 Decreased By ▼ -0.07 (-0.31%)
PTC 12.37 Decreased By ▼ -0.13 (-1.04%)
SEARL 55.70 Decreased By ▼ -0.49 (-0.87%)
TELE 7.25 Decreased By ▼ -0.15 (-2.03%)
TOMCL 36.40 Decreased By ▼ -1.29 (-3.42%)
TPLP 7.95 Decreased By ▼ -0.39 (-4.68%)
TREET 15.29 Decreased By ▼ -0.04 (-0.26%)
TRG 56.70 Decreased By ▼ -3.26 (-5.44%)
UNITY 31.85 Decreased By ▼ -0.49 (-1.52%)
WTL 1.17 Decreased By ▼ -0.01 (-0.85%)
BR100 8,295 Decreased By -111.5 (-1.33%)
BR30 26,102 Decreased By -351.9 (-1.33%)
KSE100 78,469 Decreased By -927.7 (-1.17%)
KSE30 25,198 Decreased By -319.9 (-1.25%)

ISLAMABAD: The textile sector will continue to experience economic headwinds related to high interest rates, exchange rate depreciation, high power tariffs, an increase in the cost of raw materials and suspension of the zero-rating status in the fiscal year 2024.

All Pakistan Textile Mills Association (APTMA) in a report, “Overview of Pakistan’s commitments under The International Monetary Fund (IMF) Stand-By Arrangement (SBA)” stated that another episode of exchange rate depreciation can be expected during the gradual return to a market-based exchange rate.

While the rupee experienced an appreciation following the IMF SBA, this effect was a combination of an increase in market confidence and depreciation of the US dollar.

Pakistan’s textile exports slump continues in July: APTMA

Because the trend depreciation since fiscal year 2023 has been driven by a deterioration of economic fundamentals, the effect of increased market confidence was only temporary, and the rupee-dollar exchange rate has returned to pre-SBA levels.

The association stated that the cost of borrowing will remain high in the near term. The central bank policy rate was increased to 22 percent in June 2023 in the lead-up to the IMF SBA.

The report noted that the government aims to bring inflation within the target range of 5-7 percent by the fiscal year 2026, and the SBP has committed to further hikes until inflation and inflation expectations are on a clear downward trend.

Inflation expectations began to recede in fiscal year 2023Q4 and increased market confidence following the IMF SBA and subsequent foreign capital inflows may help in anchoring them further, but they continue to remain exceptionally above desirable levels. Keeping this in mind, the policy rate can be expected to at least stay at the current level of 22 percent in the near term.

Power tariffs for B3 and B4 consumers remain high and will be further increased with effect from 1st July 2023 following the full annual rebasing exercise and adoption of the updated Circular Debt Management Plan by the cabinet.

The provision of regionally competitive energy tariffs (RCET) has been referred to as an “unbudgeted subsidy” for exporters in the SBA as the revenue differential between RCET and non-RCET tariff revenues was not budgeted for by the government when RCET was in effect, and, therefore, added to the power-sector and fiscal deficits. However, this does not necessarily mean that an exclusive power tariff category for exporters is not compliant with the IMF SBA.

If the revenue differential resulting from the provision of such a tariff category is budgeted, for instance by spreading it over other consumer categories, it will not contradict the government’s commitments under the SBA but may entail high political and other costs.

The commitment to give no more tax amnesties or exemptions will most likely mean that the zero-rating status for exporters (SRO 1125) will remain suspended, at least for the duration of the current SBA.

There may be positive impacts from progress on structural reforms, including the implementation of the WACOG mechanism for gas pricing, simplification of approval processes for FDI, reduction in customs-related processes, and simplification of tax regimes.

However, until a clear policy is brought forth and implemented by the government, both the intended reforms and their potential effects remain ambiguous, the APTMA added.

Copyright Business Recorder, 2023


Comments are closed.

Muhammad aumair Aug 16, 2023 10:44pm
Once again remind you APTMA mafia manupulate government why due to wrong perception and DLTL scheme misused and lot of investment in property and money market and refinance scheme for investment purpose not to be used in textile sector and organized further exchange rate profit must be high why please request look into matter most urgent and investigation
thumb_up Recommended (0)