Islamabad, June 21, 2025 —
Pakistan’s textile exports — a cornerstone of the country’s external sector — posted a 2% year-on-year (YoY) decline in May 2025, totaling $1.53 billion, down from $1.55 billion in May 2024, according to data compiled by Taurus Securities.
Despite this yearly dip, month-on-month (MoM) performance was strong, with textile exports jumping 25% over April 2025, reflecting improved global demand for value-added goods and a partial rebound in cotton yarn shipments.
YoY Declines in Basic Textile Exports
The yearly fall in exports was primarily driven by a slump in basic textiles, with the following key categories showing declines:
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Cotton yarn: ▼ 34% YoY
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Cotton cloth: ▼ 22% YoY
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Bedwear: ▼ 3% YoY
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Towels: ▼ 11% YoY
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Tents & canvas: ▼ 11% YoY
These categories are highly sensitive to fluctuations in raw cotton availability, production costs, and international competitiveness. Basic textile exports amounted to $181 million in May 2025, registering a 24% YoY drop.
Value-Added Segment Provides Cushion
In contrast, value-added textile products remained resilient, posting a modest 2% YoY increase to $1.2 billion, while miscellaneous textile products contributed $177 million, up slightly from last year.
The value-added segment — including garments, made-ups, and home textiles — continues to benefit from:
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Higher global demand for finished goods
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Strong pricing power in developed markets
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Policy incentives supporting manufacturers and exporters
Cotton Imports Surge Amid Domestic Shortfall
The domestic cotton supply crisis played a major role in the weakness of raw and semi-processed textile exports. From July 2024 to May 2025, Pakistan imported $1.18 billion worth of cotton, a 2.2x increase compared to $370 million during the same period last year.
This sharp increase in cotton imports was due to a 34% YoY decline in local cotton arrivals, caused by:
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Poor weather conditions
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Pest infestations
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Lower-than-expected yields
Interestingly, local cotton prices stayed stable at around Rs16,700 per maund in May 2025, indicating market adjustment to tight supply without speculative price hikes.
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Budget 2025–26: Policy Boost or Bottleneck?
To protect domestic spinning units, the FY26 budget introduced an 18% sales tax on imported cotton yarn. However, raw cotton remains exempt when supplied locally.
This policy inconsistency is a source of concern for producers who believe:
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It distorts price competitiveness
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It may hurt cost-efficient manufacturing
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It lacks a holistic strategy to develop the entire textile value chain
Stakeholders are urging the government to implement cohesive tax policies across all inputs.
Trade Talks With the US: Opportunity or Risk?
Simultaneously, ongoing trade negotiations between Pakistan and the United States present a double-edged sword. While Pakistan is pushing for greater market access for value-added textiles, it has committed to increasing imports of US cotton — raising concerns among local growers and spinners.
Analysts warn that over-reliance on imported cotton, especially in a volatile global market, could undermine long-term self-sufficiency and place additional pressure on domestic farmers.
FY26 Outlook: Recovery Hinges on Crop and Policy
Looking forward, analysts project a positive cotton production outlook for FY26, based on:
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Expanded cultivation areas in Punjab
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Improved seed quality
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Favorable early sowing conditions
If realized, this could reduce import dependence and stabilize the input supply chain for textile manufacturers.
In its report, Taurus Securities emphasizes that restoring export momentum will depend on:
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Revival of local cotton output
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Consistent tax and trade policies
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Successful negotiation outcomes with major trade partners
Conclusion: Mixed Signals for Pakistan’s Top Export Sector
While May 2025 brought a modest annual decline, the strong MoM recovery signals potential for rebound — especially if local cotton production improves and policy hurdles are addressed. With textiles accounting for over 60% of Pakistan’s exports, the sector’s performance remains vital to economic recovery, trade balance, and job creation.
