QUIETLY and under the radar of the government, a crisis in the cotton sector is brewing that increasingly calls for urgent attention from policymakers. The cotton crop this year has plummeted, due to various factors. The expectation was production of slightly more than 10m bales this year, down from the norm of 12m bales. But now that the harvest is done, less than 6m bales have come through. This means Pakistan’s imports of cotton are rising sharply, coming in above $1bn in the first half of this ongoing fiscal year, up from $543m in the same period last year, and among stakeholders the expectation seems to be that this figure could climb to $3bn by June.
This does not seem to be a one-off event. The country’s cotton harvest has suffered setbacks in the previous two years at least, but the scale of the declines is accelerating. Importing cotton is one stopgap solution, but if the diminishing harvests become the new normal, it will have a very damaging effect on the external account. Pakistan’s textile exports already use large amounts of imported raw materials, as evidenced by the rising import bill along with rising exports. If cotton is also added to the list of imported raw materials, it will mean even greater loss of competitiveness by the textile sector, which is already struggling to compete with its counterparts in Bangladesh and Vietnam. There are two problems that need to be tackled simultaneously. First the immediate situation that has arisen from the collapse of the cotton harvest, that is leading to rising prices, which could prompt exporters to demand even greater concessions from the government to maintain the momentum behind exports. The second is the longer-term stagnation and erosion of the country’s cotton output. The latter will require a deeper look, more coordination with provincial authorities and industry players. The government would be well advised to take the emerging situation more seriously than it is at present.
Published in Dawn, February 7th, 2021