In a concerning development for Pakistan, the country’s cotton import bill is projected to reach $1.9 billion in the ongoing fiscal year (FY25), amid a massive decline in local cotton arrivals.
“We believe that the cotton import bill is anticipated to reach $1.9 billion, which is 3.9x higher as compared to last year’s import bill of $448 million,” said Arif Habib Limited (AHL) in a note on Saturday.
The rise in cotton imports is attributed to a significant decline in cotton arrivals.
As of October 15, 2024, the Pakistan Cotton Ginners Association (PCGA) reported a total cotton arrival of 3,101,743 bales, a stark contrast to the 5,996,086 bales recorded on the same date in 2023—reflecting a sharp 48.3% decline in production compared to last year.
In Punjab, 1,185,647 bales have been produced so far this year, compared to 2,543,100 bales by this time last year, representing a 53.4% drop.
Similarly, Sindh’s production has declined from 3,452,986 bales in 2023 to 1,916,096 bales in 2024, marking a 44.5% decrease.
As per AHL, the decrease in cotton arrivals has been attributed to “poor farmer economics and the delayed planting of the cotton crop”.
Last year, Pakistan imported 205,000 tons i.e. 1.2 million bales of cotton amounting to $448 million, said AHL. “For FY25, local production is anticipated to reach 6 million bales and imports are expected at 5.4 million bales,” it said.
Experts believe the decline in cotton production, a major cash crop and a critical raw material of the textile sector, is concerning for the South Asian country whose major exports are made up of textile goods, accounting for over 60% of Pakistan’s total exports.
Moreover, rising imports are also likely to exacerbate the balance of payment crisis of Pakistan, which struggles to manage its foreign exchange reserves and sustain external debt.
American Dollar Exchange Rate