Cotton woes hurt textile exports

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Pakistan's textile exports — the country's largest export-earning sector and a crucial pillar for its trade balance — recorded a 2% year-on-year (YoY) decline in May 2025, totalling $1.53 billion compared to $1.55 billion in the same period last year.
The drop was primarily driven by reduced shipments of cotton yarn, cotton cloth, bedwear, towels, and tents & canvas, which fell by 34% YoY, 22% YoY, 3% YoY, 11% YoY, and 11% YoY, respectively, according to data compiled by Taurus Securities.
The textile exports, however, posted a strong month-on-month (MoM) recovery in May 2025, surging by 25% compared to April 2025, driven by improved shipments of cotton yarn, value-added textile products, and made-up articles such as art silk and other specialty textiles.
According to a report by Taurus Securities, total textile exports during May 2025 reached $1.53 billion.
Basic textile exports showed a noticeable fall on a yearly basis, totalling $181 million — a decline of 24% YoY. The slump mainly stemmed from reduced exports of raw cotton products such as yarn and cotton cloth. In contrast, value-added exports demonstrated resilience, posting a marginal 2% YoY increase to $1.2 billion, while other textile exports rose to $177 million.
Cotton imports during the first eleven months of FY25 reached $1.18 billion, showing a substantial increase of 2.2 times compared to $370 million in the same period last year. The surge was triggered by a sharp 34% YoY decline in domestic cotton arrivals due to poor crop output.
Despite this, local cotton prices remained relatively stable in May 2025 at Rs16,700 per maund, indicating that the market absorbed the supply shortfall without significant price volatility.
Looking ahead, the outlook for cotton production in FY26 is optimistic. Analysts expect an increase in cultivation areas and average yields, aided by early sowing activities in Punjab. This anticipated rise in domestic cotton availability could reduce dependence on costly imports and restore balance to the local supply chain.
The government's recent move to impose an 18% sales tax on imported cotton yarn under the FY26 budget is intended to bolster local yarn manufacturers. However, other critical raw materials like cotton remain exempt from sales tax and GST when supplied locally — a policy inconsistency that continues to squeeze domestic producers and distort market competitiveness.
Meanwhile, the ongoing US-Pakistan trade negotiations are seen as a double-edged sword for the textile industry. While Pakistan has agreed to increase imports of US cotton to secure greater access to American markets for its finished textile products, this commitment may lead to added stress on local cotton growers and spinners by intensifying import reliance.
The textile sector's mixed performance in May highlights the competing forces shaping Pakistan's largest export industry: strong global demand for value-added products versus domestic supply constraints in raw cotton. Taurus Securities suggested that a recovery in local cotton production, supportive policy adjustments, and successful trade talks with the US will be critical to sustaining export growth and preserving industry competitiveness in FY26.

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