Textile council warns Pakistan could miss export opportunity without budget reforms

Pakistan could miss a rare opportunity to capture global sourcing business shifting away from traditional manufacturing hubs unless the government adopts bold pro-export measures in the federal budget for fiscal year 2026-27, the Pakistan Textile Council (PTC) has warned.

In a letter to Prime Minister Shehbaz Sharif, PTC Chairman Fawad Anwar urged the government to translate its commitment to export-led growth into concrete policy action, saying the country’s largest export industry is under pressure from high energy costs, rising taxes and delayed refunds.

The letter followed a meeting between the prime minister and business leaders on June 4, during which Sharif reaffirmed that export-led growth remains central to the government’s economic strategy.

While welcoming the engagement with the private sector, the council said the upcoming budget must deliver meaningful relief to exporters if Pakistan is to benefit from shifting global supply chains.

“The Budget 2026-27 must translate this stated commitment into tangible relief for Pakistan’s largest export industry,” Anwar wrote.

The council expressed concern over export performance, noting that merchandise exports during the first 11 months of FY2025-26 were USD 1.66 billion lower than the same period last year, despite recent signs of recovery.

It said the decline reflects structural challenges, including uncompetitive energy tariffs, withheld refunds and an increasing fiscal burden.

“When the sector is burdened by uncompetitive energy costs, withheld refunds and an escalating fiscal load, the aggregate export numbers reflect that burden directly,” the letter said.

The council also noted that global buyers are actively diversifying supply chains across Asia, creating opportunities for alternative sourcing destinations.

Pakistan’s vertically integrated cotton-to-garment value chain and existing relationships with international brands position it to benefit from this shift, it said.

However, it warned that rising production costs are eroding that advantage.

“Global buyers are looking for alternatives, and Pakistan is on their radar. The question is whether we will seize this opportunity or price ourselves out of the market,” Anwar said.

The PTC outlined three key priorities for the budget.

First, it called for restoration of the Final Tax Regime (FTR) for exporters, saying effective tax rates of 96% to 113% on marginal income have made export manufacturing less competitive.

Second, it urged reduction of industrial energy tariffs to levels comparable with regional competitors, noting Pakistan’s industrial electricity costs remain among the highest in Asia.

Third, it demanded immediate clearance of outstanding export refunds and withheld tax payments through a transparent, time-bound mechanism.

The council said hundreds of billions of rupees remain tied up in pending refunds, constraining working capital and limiting investment in capacity expansion.

While acknowledging progress under the International Monetary Fund-supported reform program, the council said macroeconomic stabilization alone would not generate jobs or foreign exchange earnings.

“The IMF-supported reform program has provided a foundation. But stabilization is not growth, and the next phase of Pakistan’s economic story must be driven by exports,” the letter said.

Anwar warned that Pakistan has a narrow window to benefit from the ongoing realignment of global supply chains, adding that competing countries could capture new business if reforms are delayed.

The council reiterated its willingness to work with the government on technical reforms aimed at strengthening competitiveness and supporting export-led growth.