Rising Imports Threaten Current Account Surplus and Textile Exports as Industry Faces Domestic Shortfalls
Key Takeaways
1. Cotton import bill jumps by 114% in the first 10 months of FY25 due to a steep decline in local production.
2. Textile sector at risk: High electricity tariffs and cotton shortages have led to factory closures and threaten export targets.
3. Trade negotiations with the US: Pakistan is seeking relief from high tariffs by importing more American cotton and soybeans to protect its export market.
Karachi, Pakistan – Pakistan’s cotton import bill has surged by a staggering 114% in the first ten months of FY25, reaching $2.545 billion compared to $1.189 billion during the same period last year, according to recent State Bank of Pakistan (SBP) data. The dramatic increase is attributed to a sharp decline in domestic cotton production, which has dropped to nearly one-third of its historical peak, placing immense pressure on the nation’s economy and its crucial textile export sector.
Industry experts warn that the persistent shortfall in local cotton output not only burdens the economy but also threatens to reverse the country’s current account surplus, which stands at $1.88 billion for July-April FY25. The rising import bill comes amid a record trade deficit in April, raising concerns about Pakistan’s ability to maintain fiscal stability by the end of the financial year.
At the start of FY25, Pakistan had projected cotton imports at around $1.9 billion. However, frequent declines in lint production have forced the country to rely more heavily on imports, particularly from the United States. In fact, cotton imports during the first ten months of FY25 have already exceeded the entire FY24 figure by 58.4%, highlighting the growing dependence on foreign cotton.
The textile sector, which accounts for 54% of Pakistan’s total exports, is feeling the brunt of these challenges. Several textile units have shut down due to high electricity tariffs—the highest in the region—and the shortage of domestic cotton. This makes it unlikely that textile exports will surpass the $16.6 billion recorded in FY24.
In response to reciprocal tariffs of approximately 29% on Pakistani exports to the US, formal negotiations are underway with the US administration to seek relief. Pakistan is considering increased imports of American cotton and soybeans to help balance the trade relationship and protect its vital textile exports.
The ongoing crisis underscores the urgent need for policy interventions to revive domestic cotton production and support the textile industry, which remains a cornerstone of Pakistan’s economy.
