Pakistan’s exports to the European Union increased 62 per cent from 2013 to 2018. This has been made possible by the grant of GSP by the European Commission till 2022. But shipments to Europe and the US are being deferred or cancelled due to the coronavirus. The cash flow crisis is so severe companies are finding it impossible to maintain operations, resulting in bankruptcies and massive layoffs of workers. This is feared to lead to a buildup of inventory and non-payment against letters of credit. The industry in Pakistan is already cash strapped due to the sales tax system.

The country hopes to double textile exports over the next five years if the issues related to high energy pricing, gas connection and tax refunds are resolved. This implies continuation of supply of energy at competitive rates as a long term policy, slashing the interest rate to single digits, refunds of all sales tax claims and other dues of the industry and ensuring availability of cheap credit for the sector. With a long-term five-year textile policy, textile exports are expected to start growing at ten per cent to 15 per cent. The country’s production of cotton is estimated to be at 8.5 million bales.