A key contributor to the country's exports and GDP, Pakistan’s garment sector is currently struggling with rising gas prices and the removal of energy subsidies under the International Monetary Fund (IMF) program.
As per a report by Pakistan Credit Rating Agency (PACRA), the recent gas tariff hike of November 2023, which increased the cost of gas to $10.3 per million British thermal units (MMBTU), is likely to impact the sector's margins and competitiveness.
The garment sector, which includes textiles, clothing and leather products, contributed 3.0 per cent to Pakistan’s GDP in FY 2023, increasing by 8per cent Y-o-Y to Rs2.6 trillion.
However, textile exports, which accounted for 59 per cent of the country's total exports, declined by 14.6 per cent in FY 2023, due to supply chain disruptions caused by import restrictions imposed by the central bank and flash floods in August 2022. Textile imports also declined by 21.8 per cent, as the central bank restricted the import of raw materials and machinery to conserve foreign exchange reserves.
The garment sector is dominated by 59 organised composite units, with 32 listed on the Pakistan Stock Exchange (PSX), PACRA said.
The rating agency said the sector's margins were expected to remain rangebound, owing to domestic factors such as higher expected cotton production in fiscal year 2024, stable interest rates and consistent demand, both locally and globally, with global economic activity expected to rebound.
