KARACHI: Textile, the backbone of country's economy, has made net retirement of Rs30 billion banking debt in just two months of the current fiscal year.
During last fiscal year, the sector did not make borrowings for expansion / new projects, but borrowings remained limited to working capital which was reflected in increased exports. The country recorded about 25 per cent increase in exports in the last fiscal year, mostly dominated by the textile sector.The official banking data showed that all most sub-sectors of the textile retired their debts instead of making borrowings, reflecting the disappointing growth pattern of economy.One of the prime reasons which prevented the textile sector and other sectors from borrowing was the high cost of borrowing and banks less interest to extend loans to the private sector.
The government remained biggest borrower of the banking sector in 2011 and even during the last two months of this current fiscal year, the government borrowed massively from the banking system.
During July-August, the textile sector's borrowings fell to Rs484 billion from Rs514 billion in June 2011.
In the sub-sectors, borrowing for spinning fell from Rs228 billion to Rs206 billion while borrowing for weaving fell to Rs88 billion from Rs92 billion and finishing to Rs75 from Rs77 billion during the first two months.
Made-up textile articles also fell to Rs44 billion in August from Rs48 billion in June.
Bankers said the textile sector would borrow in the second quarter of this fiscal year when arrival of cotton would be higher.
However, textile experts said the sector has less chance of growth like it showed during the last fiscal year when exports were up by 25 per cent.
The higher textile-based exports were due to global shortage which pushed both the demand and prices. The textile sector benefited from this situation.
“Our markets in Europe are intact, but the price is not as attractive as it was last year,” said Aamir Aziz, a finished textile goods manufacturer and exporter.
The textile sector believes that its export to North America would not be affected despite deteriorating Pakistan-US relations. They said they are getting orders from the US.
However, they feel biggest challenge from China and India as their products are cheaper and the two countries have bigger access to US and Middle East.
Analyst Mohammad Imran, an expert on investment, said the textile sector cannot perform better unless it borrows from banks and invests heavily for expansion and sophistication of textile products which China and India are doing.
He said there was a need for a flexible textile strategy which could adjust as per market requirements.
Dear visitor, the comments section is undergoing an overhaul and will return soon.