Pakistan’s textile industry appears to have delivered good news. Export earnings rose from Rs 3.28 trillion in 2021-22 to Rs 5.01 trillion in 2024-25. Policymakers cite this as proof that currency depreciation revived export competitiveness.
It didn’t.
The rupee mirage
In dollar terms, textile exports fell from $19.3 billion to $17.9 billion. Pakistan earned $1.4 billion less in real export value while rupee receipts rose only because the exchange rate collapsed from Rs 170 to Rs 280 per dollar.
What was celebrated as success was an accounting illusion. Behind the nominal numbers, the productive core of the industry was being hollowed out—resulting in Rs 6.6 trillion in destroyed economic value that remains officially unacknowledged.
What actually defines export success
Export competitiveness is not about nominal receipts or a cheaper currency. It is about how many domestic resources are consumed to earn one dollar.
Pakistan’s textile sector is structurally domestic-input heavy—around 75–80 percent of costs. Cotton should have been the industry’s natural advantage.
Instead, years of policy neglect, poor seed quality, water mismanagement, and pest shocks collapsed domestic cotton output, forcing large-scale cotton imports.
This single failure fundamentally changed the economics of the industry. A sector designed around local raw material became import-exposed just as the currency collapsed.
In 2022, exporters spent roughly Rs 128 in domestic resources to earn one export dollar. By 2025, that cost rose to around Rs 210.
That is a 64 percent increase in domestic cost for the same dollar of exports.
Over three years, this productivity collapse destroyed Rs 5.3 trillion in value. The industry now burns more labour, energy, capital, and increasingly imported cotton just to maintain shrinking dollar earnings.
When depreciation makes production impossible
Currency depreciation triggered a second crisis. Imported cotton, along with dyes, chemicals, and spare parts, became prohibitively expensive overnight. Energy tariffs increased 70-100. Interest rates rose to 22 percent. Export prices did not move.
Margins vanished. But the real damage was liquidity.
Textile exports operate on 60–90 day payment cycles. As input costs surged, existing credit lines stopped working. A facility that financed full production in 2022 often covered barely 40 percent of the same orders by 2025.
Firms with confirmed export contracts, operational factories, and willing buyers were unable to execute orders because they lacked cash to purchase imported cotton and pay wages.
This was not inefficiency. It was systemic paralysis.
The working capital breakdown erased another Rs 1.275 trillion in potential economic activity.
Policy failure, not bad luck
This collapse was policy-made.
Energy prices were raised without fixing reliability or cross-subsidies. Pakistan’s energy cost per export dollar now exceeds that of regional competitors.
Interest rates were pushed to extreme levels with no meaningful export-finance protection. Manufacturers increasingly operate to service debt rather than invest.
Currency depreciation was used as a shortcut for reform. It was never paired with agricultural recovery, cotton productivity, technology upgrading, or scale incentives. The rupee was weakened while the industry’s input base became more import-dependent.
Despite repeated promises of value addition, incentives continued to reward low-margin commodity exports. Firms attempting to move up the value chain faced higher risk and higher financing costs.
Rising costs were normalised. Survival replaced competitiveness as the policy benchmark.
The real cost
Add it up: Rs 5.3 trillion in productivity destruction, Rs 1.275 trillion lost to liquidity failure, and foregone export earnings. Rs 6.6 trillion wiped out in three years—over five percent of national output.
Yet nominal export receipts rose, so the model is still defended.
Why this is now an emergency
The damage is compounding. Firms cannot modernise machinery while struggling to finance imported cotton. Workers remain trapped in low-skill jobs. Pakistan is locking itself into obsolete production as competitors advance.
If nothing changes immediately, the next phase will not be stagnation—it will factory closures, consolidation, and permanent loss of industrial capacity.
Bottom line
Pakistan spent Rs 6.6 trillion over three years to earn fewer export dollars than before. This is not resilience. It is a slow dismantling of the country’s largest industrial employer.
This requires emergency intervention, not incremental adjustment. The math has already turned against us.
Fazeel Asif
Email: fazeel63@gmail.com