FAISALABAD: The Pakistan Textile Exporters Association (PTEA) has expressed deep concern over the current economic uncertainty, citing high interest rates and limited availability of funds as major impediments to the growth of industrialization and exports in the country.
In a statement issued on Monday, Khurram Mukhtar, the Patron-in-Chief of PTEA, highlighted the negative impacts of the economic slowdown on the textile industry, which is Pakistan’s largest manufacturing sector.
He mentioned that textile exports have declined from a peak of $1.74 billion in April 2022 to a low of $1.18 billion in February 2023, and are now stagnant at around $1.4 billion per month, $600 million below the installed production capacity.
Mukhtar pointed out that the high interest rate, which is currently at a record high of 22%, is adversely affecting the export sectors in Pakistan. He compared the policy rates of regional countries, such as Bangladesh, India, Vietnam, and Sri Lanka, which range from 4.5% to 11%, highlighting the disadvantage faced by Pakistan.
The high interest rates are creating uncertainty in the business environment and hindering long-term plans and investments due to hefty borrowing costs. Additionally, exporters are facing challenges as their funds are stuck in the refund regime, forcing them to take loans at high interest rates, thereby increasing the cost of doing business and making them uncompetitive in the region.
Mukhtar emphasized the importance of the Large-Scale Manufacturing sector, which accounts for almost a quarter of the country’s GDP. He noted that the growth in output of the sector has decreased by less than 1% during the July-January period of the financial year 2023-24.
This drop, coupled with other issues such as high inflation, a growing current account deficit, depleting foreign exchange reserves, fiscal imbalances, and declining foreign direct investments, poses a serious concern for the economy.
Copyright Business Recorder, 2024
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