KARACHI, Sept 12: Over $1bn trade deficit in first two months, an unimpressive export performance, fear of drop in cotton output and mounting pressure on rupee exchange rate have compelled the government to explore remittances and other avenues for additional foreign exchange.
Official statistics have already reported a trade imbalance of over $1bn in July-August of FY2007 while extended monsoon rain in September has affected the cotton growing areas in Seraiki belt and in Sindh forcing many owners of textile mills to explore import prospects.
“Cotton growers in Mirpurkhas and some other parts of lower Sindh are devastated by August and September rains, while those in upper Sindh —Nawabshah, Sukku etc., — are not sending happy messages,” Anwaz Aziz, a local cotton dealer said.
Cotton traders report “loss and damage” to crop in Vehari, Multan and some other parts of Seariki belt in Punjab.
Millers place their cotton demand at 14 million bales plus for the domestic industry forcing them to explore import prospects from various parts of the world.
Cotton import will depend largely on domestic market capacity to absorb textile products, export possibility of textile products and the availability of foreign exchange which at present is not difficult to obtain but may become a little difficult in next few months.
But far more distressing was an across-the-board drop in cotton and almost all textile products export in July this year as against in July 2005. Except for cotton yarn which increased by about 19pc in quantity and more than 20pc in value and tents and canvas that too showed a modest increase.
All other textile products — cloth, knitted, crocheted fabrics, bedwear, hosiery and knitwear, readymade garments, synthetic fabric and a variety of other textile products have shown a declining trend.
Market analysts are keen to know details of fall in quantity and value of readymade garments in July 2006 after SBP Governor Dr Shamshad Akhtar informed Faisalabad textile exporters that 3,000 cases of misuse of 6pc rebate on research and development on export of garments.
According to official figures garments export fetched $1.32bn in 2005-06 which amounts to about Rs80 billion. About Rs5 billion were given away as research and development rebate.
In the current fiscal year the official notification on research and development rebate on home textiles export declares it clearly that a fraudulent claim may force Textile Ministry to impose 300 per cent of bogus claim amount as fine.
For rebate on readymade garments, the Commerce Ministry has issued the notification and it is understood that the ministry is authorised to impose fine.
The export of cotton and textile in July 2006 amounted to $777.27 million as against $823.96 million in same month of 2005, showing a fall of 5.67 per cent.
Total exports have come down to $1.22 billion in July this year from $1.29 billion, a fall of 8.57 per cent. The share of textile in overall export in July this year has come down to 64.88 per cent from 68.23 per cent last year.
Earlier, in the second half of last fiscal year the textile products hardly managed to show a modest rise of 8pc in exports and fetched a total of $4.98 billion as against $4.68 billion in the same period the previous year.
Textile exports in first half of 2005-06 showed a robust increase of almost 23pc and amounted to $4.92 billion as against $4 billion export earnings realised by textile products in July-December 2004. In the entire 2005-06 textile exports showed a growth of 15pc and fetched $9.91 billion.
Another interesting aspect of textile export is that Pakistan’s textile export to the US and EU dropped by 0.8pc in value terms after showing an increase of 5.7pc in quantity during the year 2005.
Analysts compare Pakistan’s dismal export performance with that of China which earned $48.32 billion more or 45.6 per cent rise from textile export to the US and EU. India earned 21.5 per cent more and netted $11.49 billion, Bangladesh 2.3 per cent more and earned $6.98 billion.