Value-added goods fuel recovery, but millers urge policy clarity to reach $20B target
Pakistan’s textile sector posted a stronger-than-expected performance in FY2024–25, with exports rising by 7.22% to $17.88 billion, up from $16.68 billion the previous year. The growth—driven largely by value-added segments—has surprised industry watchers, many of whom had braced for a downturn amid mounting economic and geopolitical headwinds.
Although the figure remains below the record $19.3 billion set in FY2021–22, the uptick has sparked cautious optimism in the country’s leading export industry.
According to official data, textile exports for June 2025 alone reached $1.53 billion, reflecting a 7.75% year-on-year increase. From July 2024 through May 2025, total exports stood at $16.37 billion, a 7.37% rise compared to the same period last year.
Key contributors to this rebound were value-added categories: knitwear exports surged by 14.46%, readymade garments by 16.35%, and bedwear by 10.56%. In contrast, yarn exports declined sharply, highlighting persistent challenges in upstream production and shifting global demand preferences.
Unexpected Gains Amid Headwinds
Industry insiders admitted the rebound defied their initial expectations. Rising input costs, power shortages, volatile exchange rates, and the lack of a consistent textile policy had led many to anticipate a difficult year.
“To be honest, most of us expected a decline,” said Faisal Shareef, a textile mill executive. “Energy shortages were severe this summer, and we had no long-term policy support from the government. Still, modest demand recovery in Europe and the Middle East helped us push value-added exports.”
Analysts point to a gradual post-pandemic shift back toward Pakistani suppliers as a contributing factor. While purchasing power remained limited in many advanced economies, a recovery in retail clothing sales abroad translated into renewed orders for Pakistani exporters.
Economists Call for Structural Reforms
While the export uptick is a welcome sign, economists warn against reading it as a full-scale recovery. “The growth is encouraging, but it’s not a return to historic highs,” said Dr. Hira Mehmood, a Lahore-based economist. “Structural inefficiencies remain. Without a clear industrial policy, rationalised energy pricing, and tax simplification, the sector’s competitiveness will remain under pressure.”
Ongoing exchange rate instability and complex taxation policies continue to cloud exporters’ ability to plan for the medium term.
External Uncertainties and Trade Pressures
Globally, the industry faced several disruptions. Geopolitical tensions, particularly in the Middle East and Red Sea shipping lanes, contributed to elevated logistics costs. The evolving U.S. trade stance under the Trump 2.0 administration also raised concerns about potential changes in preferential access and tariff structures.
“Buyers are being cautious,” said Karachi-based exporter Salman Rafi. “Instead of placing large annual orders, they’re breaking them into smaller batches because of uncertainty around U.S. and global trade policies.”
The tense diplomatic climate with India also cast a shadow over regional trade dynamics. While no direct barriers affected textile exports, exporters feared long-term contract risks if tensions between the two countries escalate.
Shift Toward Value-Addition Pays Off
Despite external and internal pressures, the sector’s pivot toward higher-margin, finished goods has been a stabilising factor. “We moved away from exporting raw or semi-processed materials and focused on garments and tailored items,” said Rafi. “It improved margins and gave us more control over pricing and quality.”
Outlook: Can Pakistan Hit $20B?
Looking ahead, industry players believe reaching $20 billion in exports is possible—provided economic stability returns and energy costs are brought in line. “If there’s meaningful government support and clarity on policy, we could cross $20 billion by FY26 or FY27,” said Shareef. “But if inflation remains high, power tariffs stay unaffordable, and tax issues persist, we’ll be stuck in survival mode.”
While FY25 may not have delivered record numbers, it demonstrated the sector’s resilience—and offered a glimpse of its potential, if given the right environment to grow.
