Textile and clothing (T&A) exports from Pakistan contracted by 3.09 percent in July’24, signaling potential struggles for the sector in the face of stringent new tax measures introduced this fiscal year.

As per the data released by the Pakistan Bureau of Statistics (PBS), the textile and clothing sector, which accounts for over 60 percent of the country’s total exports, experienced a decline for the second consecutive month. This follows a 0.93 percent drop in June, despite the government's recent budget measures aimed at promoting exports—a move that top textile exporters have criticised. The sector had shown a significant rebound in May with double-digit growth after two months of sluggish performance. However, the rising costs of energy and high taxation are now contributing to the downturn.

Despite having an installed capacity of $25 billion, Pakistan’s textile and clothing exports have remained stagnant over the past two years, according to industry exporters. They cite structural issues as a primary reason for this lack of growth.

In absolute terms, textile and clothing exports from the country declined by 10.13 per cent to $1.27 billion in Julyfrom $1.31 billion in the same month last year.

The government's decision to increase the tax rate on exporters' personal income in the 2024-25 fiscal year is expected to have a more pronounced impact in the coming months.

According to the PBS data, the value of readymade garment exports increased by 7.57 percent increase in July, along with an 8.47 percent rise in quantity. However, the value of knitwear exports dropped by 1.88 percent and volume by 6.37 percent. Bedwear exports posted a slight decrease of 1.20 percent in value but grew by 4.07 percent in quantity.

Towel exports dropped by 3.67 percent in value and 2 percent in quantity, while cotton cloth exports decreased by 0.56 percent in value and 4.72 percent in quantity.

Yarn exports experienced a significant drop of over 42.54 percent compared to July last year. The exports of made-up articles, excluding towels, declined by 5.84 percent, while exports of tents, canvas, and tarpaulin rose by 14.22 percent Y-o-Y.

In terms of imports, synthetic fiber imports fell by 33.23 percent, and synthetic and artificial silk yarn imports declined by 17.68 percent. However, other textile items saw a notable increase of 53.20 percent during the same period. The import of raw cotton decreased by 20.60 percent in July, whereas the import of second-hand clothes increased by 13.47 percent.

Overall, total exports in July grew by 11.75 percent, reaching $2.31 billion from $2.06 billion in the same month last year.