ISLAMABAD: Left without sufficient locally produced cotton and unable to import the raw material due to LC restrictions placed by the central bank, Pakistan’s textile manufacturers have turned to the United States Embassy, demanding that the ambassador take their case to the federal government.
In a letter addressed to US Ambassador to Pakistan Donald Blome, a copy of which is available with Profit, the industry made wide-ranging complaints and asked that the ambassador take their plea to the government. “Unfortunately, the import of cotton has been severely restricted in the country. Banks are not opening L/Cs or retiring cotton imports through CAD. The industry is running out of cotton stocks and as a consequence, our mills have either shut down or will shut down in the very near future if decisive and urgent action is not taken,” reads the letter which has been signed by Gohar Ijaz, who is the Patron-in-Chief of the All Pakistan Textile Mills Association (APTMA).
“Therefore, we request the American Embassy to take up the case with the US Government to sanction a $2 billion soft credit/loan for the express purpose to import 3.5 million bales of cotton from the US. Provision of this loan will insure the employment of millions of workers and will improve Pakistan’s balance of payments. Your immediate action will be highly appreciated as the matter is extremely urgent. We also seek time to meet with you earliest to go through the details.”
State of the industry
While sending a written request of this nature to the ambassador of a foreign country is unusual, it has come after APTMA had already tried writing to both Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar in the months past. It also points towards the desperation that these times have brought. The SBP has been stingy with granting lines of credit (LCs) which is leading to a lot of industries trying to find creative solutions like this one.
As the letter to the ambassador explained, Pakistan’s domestic cotton production has declined to a historic low this year, dropping to 5 million bales for the current year mainly due to heavy rains and floods. The estimated cotton production losses have been worth more than $2 billion. “This domestic cotton production is significantly shorter than the textile sector requirements as the textile industry of Pakistan consumed nearly 15 million bales of cotton last year, and the current season anticipated demand indicates that about 10 million bales will need to be imported,” reads the letter.
“Unfortunately, the import of cotton has been severely restricted in the country. Banks are not opening L/Cs or retiring cotton imports through CAD. The industry is running out of cotton stocks and as a consequence, our mills have either shut down or will shut down in the very near future if decisive and urgent action is not taken.”
The reality is that this year’s floods and falling agricultural output is not the biggest issue. The textile industry has been dependent on imports for a while now and Pakistan’s domestic cotton production has not been enough to provide for it for a while. As such, the textile industry has also had its role to play in the balance of payments crisis as have all other industries. Indeed, the textile industry is just another in a sea of industries — all of which are adrift after problems with LCs.
As the letter itself admits, during the last couple of years major cotton import of Pakistan is from the US. “Last year Pakistan imported 5 million bales of cotton worth $1.48 billion with 1.7 million of those bales coming from the US. As of today, contracts for the import of 1.2 million bales of cotton from the US would be the main source of import for the current year.”
Continued pleas for help
Going to the US Ambassador is the latest in a series of cries for help from APTMA and the textile industry. The letter to Ambassador Blome was written on the 14th of January. Two days before that on the 12th of January, another letter signed by Gohar Ijaz and bearing the APTMA letterhead was sent to the finance minister.
Addressing Ishaq Dar, Mr Ijaz made the same argument — the textile industry was a major exporter and needed its raw ingredient cotton to do so. However, local cotton was not nearly enough. “Unfortunately, the import of cotton has been severely restricted in the country. Banks are not opening L/Cs or retiring cotton imports through CAD. The industry is running out of cotton stocks and as a consequence, our mills have either shut down or will shut down in the very near future if decisive and urgent action is not taken,” reads the letter — the exact same words sent to Blome two days later.
Back on the 22nd of December 2022, Gohar Ijaz had sent another letter from the APTMA platform to the prime minister. That letter went into more detail, noting the different problems the industry had faced beginning with supply chain disruptions, liquidity constraints, debt, energy shortage, and a lack of expansion.
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