Pakistan's economic turmoil forces closure of textile factories due to cotton shortage

Textile factories across Pakistan are facing a shutdown due to the shortage of Cotton. The already fragile economy of Pakistan was hit hard by the devastating floods which were triggered by torrential monsoon rains and left around 3.4 million children in need of assistance and at increased risk of waterborne diseases, drowning and malnutrition, as per the UNICEF.  

The country now faces a shortage of cotton as the crop was destroyed by the floods. The subsequent shortage of the crop has forced the owners to shut down textile factories following the floods. The textile sector in Pakistan accounts for 8% of the country’s economy, employs up to 10 million people and adds more than half to the nation's export earnings, reported Geo News.  

Small firms in the industry have been affected the most  

According to the report, due to being well stocked, the larger firms are less affected due to cotton shortages. However, Pakistan's small factories that indulge in manufacturing bedsheets and towels for export to the US and Europe have started to shut down, reported Geo News.  

Khurram Mukhtar, the patron-in-chief of the Pakistan Textile Exporters Association said in a statement that a shortage of good quality cotton, heightened cost of fuel, and poor recovery of payments from buyers are the reasons behind the closure of small textile factories. Mukhtar further stated that larger firms supplying global companies like Puma, Nike, Adidas, AG, SE, and Target Corp are well stocked and therefore, less affected.  

Pakistan’s struggle with inflation amid floods  

The floods that struck Pakistan around June this year, submerged around a third of the country, killed above 1,600 people, and damaged about 35% of the cotton crop, stated Geo News.   

The latest blow to the nation comes at a difficult time as Pakistan is already struggling with high inflation and falling currency reserves. As per the Geo News report, Faisalabad-based AN Textile stated during an exchange filing earlier this month that due to an "unforeseen downturn in the market and unavailability of good quality cotton" following the natural calamity, the company's mills have been temporarily closed.  

Mukhtar further claimed that Cotton production in Pakistan could slump to 6.5 million bales (of 170 kilograms each) this year in contrast to the target of 11 million. Gohar Ejaz, patron-in-chief of All Pakistan Textile Mills Association claimed that such a development could force Pakistan to spend around $3 billion to import cotton from countries such as Turkey, Brazil, the US, East and West Africa and Afghanistan. About 30% of the struggling economy’s textile production capacity for exports has been hampered because of energy and cotton shortages, Ejaz informed. Pakistan's textile sector, which exports about 60% of its production, is also facing poor demand in the domestic market due to the fragile economic situation.

Image: AP