Wednesday, July 21, 2021

Pakistan's Textile & Garment Exports Set New Record of $15.4 Billion in FY 2020-21

Pakistan's textile and garment exports jumped 22.94% to reach $15.4 billion in Fiscal Year 2020-21, according to data from Pakistan Bureau of Statistics.  At the same time, the country's technology exports surged 47% to set a new record of $2.12 billion for the last fiscal year that ended in June 2021. Pharmaceutical exports also saw 25.3% growth to $241 million in first 11months of FY 2021, indicating Pakistan's export diversification with higher value added goods and services. 

Pakistan Textile/Apparel Exports. Source: Arif Habib Ltd
Pakistan Textile Exports FY 2006-2021. Source: APTMA

Overall, Pakistan's exports of goods for fiscal 2020-21 rose 13.7% to $25.63 billion. The nation's service exports increased 9.2% to $5.93 billion in fiscal 2021. Combined exports of goods and services added up to $31.56 billion in July 2020 to June 2021 period. 

Pakistan Tech Exports. Source: Arif Habib Ltd. 


Imports grew 23.2%, much faster than exports as the economy recovered from the COVID-induced slump, widening the trade gap in the process. Energy demand drove imports of oil and gas to new highs. 

Pakistan Current Account Balance. Source: Arif Habib Ltd. 


Record inflow of nearly $30 billion in remittances from overseas Pakistanis helped reduce the current account deficit to $1.85 billion in FY 2020-21. It's down 58.4% from $4.45 billion in FY 2019-20. 

Overseas Pakistanis' remittances represent 10% of the country's gross domestic product (GDP). This money helps the nation cope with its perennial current account deficits. It also provides a lifeline for millions of Pakistani families who use the money to pay for food, education, healthcare and housing. This results in an increase in stimulus spending that has a multiplier effect in terms of employment in service industries ranging from retail sales to restaurants and entertainment. 

Over 10 million Pakistanis are currently working/living overseas, according to the Bureau of Emigration. Before the COVID19 pandemic hit in 2020,  more than 600,000 Pakistanis left the country to work overseas in 2019. The average yearly outflow of Pakistani workers to OECD countries (mainly UK and US) and the Middle East has been over half a million in the last decade. 


Pakistan ranks 6th among the top worker remittance recipient countries in the world.  India and China rank first and second, followed by Mexico 3rd, the Philippines 4th, Egypt 5th and Pakistan 6th.  

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan's Debt Crisis

Declining Investment Hurting Pakistan's Economic Growth

Brief History of Pakistan Economy 

Can Pakistan Avoid Recurring IMF Bailouts?

Pakistan is the 3rd Fastest Growing Trillion Dollar Economy

CPEC Financing: Is China Ripping Off Pakistan?

Information Tech Jobs Moving From India to Pakistan

Pakistan is 5th Largest Motorcycle Market

"Failed State" Pakistan Saw 22% Growth in Per Capita Income in Last 5 Years

CPEC Transforming Pakistan

Pakistan's $20 Billion Tourism Industry Boom

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Riaz Haq's YouTube Channel

PakAlumni Social Network

13 comments:

Ahmed said...


Dear Sir

Thank you for posting such great and informative post .

Sir, many Indians come to youtube channels of Pakistan and on Pakistani pages of facebook and brag about their economic growth and especially about the size of their economy. They say that their are 600 billion US$ in the reserves of India and their are only 8 billion US$ in the reserves of Pakistan. Although recently the reserves of Pakistan as far as I know has crossed more than 20 billion US$. Do you think that for a country like Pakistan which has atleast 200 million people(6th or 7th largest population in the world),this much reserve is enough?



Looking forward to your answers.

Thanks

Ahmed said...


Dear Sir

I have some other question ,is it true that the total size of the economy of a country depends on the foreign exchange reserves? The greater will be the foreign exchange reserves, the greater will be the size of the economy ?

Also Sir, is it true that remittance and foreign investment which comes into a country, is included in "FOREIGN EXCHANGE RESERVES"?

I hope my questions are clear

Thanks

Riaz Haq said...

Ahmad: " They say that their are 600 billion US$ in the reserves of India and their are only 8 billion US$ in the reserves of Pakistan"


India runs huge trade and current account deficits. So where do these reserves come from? Mainly from India's western benefactors who want to prop it up as counterweight to China.

http://www.riazhaq.com/2015/04/can-indian-economy-survive-without.html


"Data from IMF’s Balance of Payments statistics for the calendar year (CY) 2020 reveals that India received about $80 billion in foreign direct investment (FDI) and foreign portfolio investment (FPI) inflows, ranking behind China but higher than Russia, Brazil and South Africa put together. As a percentage of GDP, India’s inflows amounted to about 3 per cent, while China and Brazil received 3.2 and 2.2 per cent respectively. On the other hand, Russia and South Africa had capital outflows. It appe .."

Read more at:
https://economictimes.indiatimes.com/news/economy/finance/will-the-second-covid-wave-dent-resilient-foreign-investment-inflows-into-india/articleshow/82792701.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Ahmed said...


Dear Sir

This is to inform you that since 1990s, the textile sector of Pakistan was performing very poorly .According to latest reports, the Textile sector of Pakistan was not functioning with its full capacity since 1990s. It is only when PTI government came into power, PM Imran Khan took initiative to revive or restore the textile sector of the country and it was under PTI government that now mashallah textile sector is again functioning in its full capacity and the businessmen of textile sector have given interview to Pakistani journalist and have expressed their happiness over this initiative of PTI government.

So we must appreciate PTI government where they are doing a good work.

Thanks

Ahmed said...


Dear Sir

Also let me add that PTI government of PM Imran Khan has actually formed a think tank where I think the top economists and researchers are siting and they are conducting research on the economic issues of the country. Their aim and objective is not only to take the economy of Pakistan out of crisis but their aim and objective is also to take the economy of Pakistan to next level.

According to some sources,the exports of Pakistan have increased ,the remittance coming to Pakistan as you have mentioned earlier in your post has increased.

according to some sources, PTI government has reduced its own expenses and is focusing on increasing the foreign exchange reserves.

Riaz Haq said...

Pakistan has been getting quite a lot of good news lately on the economic front. The country posted impressive growth numbers for the last financial year.


https://tribune.com.pk/story/2311426/pakistans-economy-whats-next

The large-scale manufacturing sector grew by more than 14% during July 2020 to May 2021, on the back of astounding growth in automobile, textile, pharmaceutical and chemical sectors. Pakistan received record remittances of $29.4 billion during the last financial year. The country has ‘almost’ completed the FATF action plan, with only one outstanding action. And the vaccination drive and handling of the pandemic have been truly impressive, mitigating the adverse economic impacts. Yet the economic uncertainty is far from over.

Inflation remains high. Trade deficit has bounced back. The circular debt keeps piling up. And debt-to-GDP ratio remains in the red zone. Pakistan’s recent economic recovery therefore remains fragile, especially in the wake of the impending fourth wave of Covid-19.

Going forward, Pakistan’s short-term economic trajectory would depend upon three things: the country’s revenue performance, its current account balance, and the fate of the IMF programme.

On the revenue side, the government has set an ambitious target of Rs5.8 trillion for FBR to finance the expansionary budget to provide a much-needed stimulus to the economy. The realisation of this ambitious target in turn would depend on a host of revenue and enforcement measures. While this target is not impossible to achieve, a more realistic assessment suggests that FBR may fall short of this target by Rs300 to 400 billion. Besides tax revenues, meeting the targets for other revenue sources would also be critical to keep the fiscal deficit in check, such as proceeds from privatisation and petroleum development levy. Any shortfall on the revenue front can take a toll on the promised development spending and may even necessitate introducing a mini budget in the next few months.

Then comes the current account. So far, the healthy remittance inflows have really helped the current account to end up in green, despite the trade deficit touching $30 billion. With growth bouncing back, the imports are likely to swell, further widening the trade deficit. What remains to be seen is if the remittances can maintain their healthy trajectory to compensate for rising trade deficit.

The increase in remittances can be attributed to the pandemic that greatly restricted international travel, a crackdown on hawala/hundi under the FATF action plan and various measures by the government such as incentivising the use of formal banking channels. But considering that remittances from Saudi Arabia, UAE and GCC countries grew only by 9 to 16%, whereas those from UK, US, EU posted 50+% growth, indicates that at least some part of these increased remittances would evaporate once air travel is fully open.

On a monthly basis, the CAD has already touched $632 million and if it continues like this, the rupee can face more pressure leading to devaluation.

The fate of the IMF programme will also play an important role in deciding the near-term prospects of our economic future. Given our external financing needs, Pakistan cannot afford to walk out of the IMF programme. This means that not only will have we to comply with our revenue target but may also have to create additional fiscal space and move the needle on structural reforms. The country would therefore be facing a delicate balance, as too much of tightening could disrupt the efforts to stimulate growth, but too little effort would disrupt the IMF programme.

Besides these economic factors, the rapidly evolving situation in Afghanistan and the looming threat of a fourth wave can also affect some of these calculations. However, once Pakistan successfully navigates its way through these challenges, the medium-term economic future for the country looks bright.

Anonymous said...

So where do these reserves come from? Mainly from India's western benefactors who want to prop it up as counterweight to China.


Ok so how does this work?Someone at the pentagon calls up major wall street firms and orders them to invest 100s of billions in India?

Riaz Haq said...

Anon: "Ok so how does this work?Someone at the pentagon calls up major wall street firms and orders them to invest 100s of billions in India?"

The Pentagon has little to do with US trade and investment policies with foreign nations.

US administrations incentivize trade and investment by a variety of government policies ranging from investment credits to trade preferences and low-interest loans from US-supported international financial institutions like the World Bank and regional development banks like ADB. The private sector takes cues from the government when it makes investment decisions. At the same time, investors, exporters/importers and lenders stay away from nations sanctioned by the United States.

Examples:

India was the largest borrower from World Bank for 3 of last 4 years
World Bank assistance to India peaked in fiscal year 2010 at $9.3 billion, and help has been provided across sectors like road and power infrastructure, agriculture, health etc. https://theprint.in/economy/india-was-largest-borrower-from-world-bank-for-6-out-of-last-10-years/197583/

US body announces $54 mn investment in India to support infra projects
An American financial corporation on Tuesday announced that it will invest USD 54 million in India to support the development of critical infrastructure projects in the country

https://www.business-standard.com/article/economy-policy/us-body-announces-54-mn-investment-in-india-to-support-infra-projects-120122201602_1.html


In 2019, the United States had comprehensive sanctions regimes on Cuba, North Korea, Iran, Sudan, and Syria, as well as more than a dozen other programs targeting individuals and entities pertaining to certain political crises or certain types of suspected criminal behavior, such as narcotics trafficking. OFAC routinely adds (and deletes) entries on its blacklist of more than six thousand individuals, businesses, and groups (collectively known as specially designated nationals, or SDNs.) The assets of those listed are blocked, and U.S. persons, including U.S. businesses and their foreign branches, are forbidden from transacting with them. Under President Trump, OFAC has designated several high-ranking individuals and politically connected firms from Cuba, Myanmar, Nicaragua, and Venezuela. The agency has also recently drawn attention for removing some companies controlled by Russian oligarchs from the SDN list.

https://www.cfr.org/backgrounder/what-are-economic-sanctions

Anonymous said...

You do realize India's investment to GDP ratio is something like 30%.Its economy is more than 2 trillion.

It is investing 600+ billion dollars every year most of it its own money in its economy.

The few billion loans is a rounding error in the broader scheme of things.

Riaz Haq said...

Anon: "The few billion loans is a rounding error in the broader scheme of things"

The $600 billion domestic investment in India is in Indian rupees, not US$.

India needs US$ for critical imports like energy, machinery and technology. And India does not earn enough US$ to meet its needs and build reserves. That's where the FDI, FII and external debt fill the gap.

samir sardana said...

It is the COVID bonanza ! The Supply chains in India and Bangladesh,are completely dislocated.

As I said on February 27, 2021 at 9:39 AM,on https://www.riazhaq.com/2021/02/can-sez-industrial-parks-help-pakistan.html

"With COVID,if manufacturing requires a 10 foot distance,at the shop floor,then manufacturing from EU/USA will have to shit to Pakistan - as it has the best COVID track record, among all the above nations.Vietnam's numbers cannot be believed"

THE MANUFACTURING AND IMPORTS of TEX into US/EU, has STARTED THE SHIFT TO PAKISTAN.

At the time of MY POST ABOVE,Vietnam had NIL cases of COVID !

I HAD SAID "Vietnam's numbers cannot be believed".TODAY THE COVID NUMBERS ARE 7000 A DAY !

AND EVEN THESE NUMBERS CANNOT BE BELIEVED !

AS I SAID THE VIET SEZ MODEL,IS NOT RIGHT FOR PAKISTAN !

https://riazhaq.com/2021/03/can-pakistan-follow-vietnams-example-to.html?m=1

"CPEC is for long term strategic ventures.The SEZs in Vietnam are there to leverage on opportunities arising out of supply chain dislocations and regulatory changes in PRC - which is a short term opportunity"

DUE TO RISING OIL PRICES AND FALLING EXPORTS,OF INDIA AND BANGLA, THEIR CURRENCIES HAVE DEPRECIATED AND SBP HAS MATCHED THE DEPRECIATION OF THE PKR.THE DEPRECIATION OF THE PKR IS LIKE A STATE SUBSIDY TO THE EXPORTERS,BUT FUNDED BY IMPORTERS !

PAKISTAN HAS TO JUST NAVIGATE THE PKR-USD !

A nation with a trade and CA deficit,will have a secular currency decline,w.r.t the USD, especially since the US economy is thriving and yields are EXPECTED to rise,and the Fed is expected to HIKE.However,the SBP can make the decline slow and predictable,but also, to ensure that it is "not worthwhile to speculate",on the decline

Speculators are attracted to predictable sharp moves in the PKR.The Shipping Bills and Invoices filed at Port Qasim for Pakistan fuel imports are known to "informed punters" (as they are large FX exposures,of a few importers).Thus,they know the COMMITTED dates of payments and CRYSTALLISED DATE OF PAYMENTS.SBP also prepares the FX ageing outflows,and this is also known to banks,and thus,the "informed punters".

The same applies to the EID inflows

This makes speculation easy,for the punters.If SBP intervenes in the FX market,it is losing its gunpowder,for no reason.

Therefore,the SBP needs to create a framework,to encourage roll overs,and match it to periods of expected large inflows.Else Exporters will route exports via shells,hold export proceeds in USD in the shell,and bring the USD into Pakistan at their option,and then again, hold it in USD accounts,and convert it as the best rates.To offset that,the SBP will offer HIGHER USD rates in Pakistan,which is also a loss to the nation

IS THIS FX GAMBLING,THE CORE SKILL OF AN EXPORTER ? Or SHOULD it be ?

Roll over of import bills,and a planned depreciation in PKR,to offset the depreciation in the INR and Taka,is the way to manage the PKR.

In the above framework,exporters will book the USD forward,at the time of the export order, and the SBP will have a complete database of expected dates of FX inflows,and that will futher aid the SBP in planning the rollovers.It will also benefit the exporters,as it will freeze his profits,and ensure that the planned profit is as close as possible,to the actual profit.

This will also kill the grey market premium for the USD,and reduce the hawala routing of USD,as the PKR will have a secular decline.The starting point of the grey market premium is that "no one knows what will happen tomorrow".dindooohindoo

Riaz Haq said...

Pakistan's knitwear exports surged in the 2021 fiscal year, increasing 37 per cent compared to the previous 12 months.

The latest figures from the Pakistan Bureau of Statistics show that total knitwear exports were US$3.83, up from $2.8 billion in 2020, the highest growth rate amongst the country's different textile sectors.


https://www.knittingtradejournal.com/circular-knitting-news/14658-knitwear-exports-drive-pakistan-textile-growth

Riaz Haq said...

Pakistan’s knitted garment manufacturers have requested their government to allow them representation in meetings related to textile exports, The Express Tribune reports. In a statement this week, Pakistan Hosiery Manufacturers and Exporters Association (PHMA) Chief Coordinator Muhammad Jawed Bilwani highlighted that Pakistan’s knitted garment exports had surged by 36.57% in the 2020-21 fiscal year.

https://www.knittingindustry.com/pakistans-knitted-garment-exports-to-rise-by-20/


Total exports rose from $21.4 billion in FY20 to $25.3 billion in the previous fiscal year, and the share of textiles in overall exports came in at 60.86%.

“Hosiery products have kept a major share of 15% in the textile group and this segment has the potential to contribute 25% to the total textile exports of the country,” Muhammad Jawed Bilwani, told the newspaper. Bilwani added that the share of knitted garments in total exports would rise to 20% in fiscal year 2021-22.

“Had the government keenly considered proposals of the knitwear sector and addressed all problems and issues of businessmen, the contribution of knitwear garments to the total exports would have been much higher in fiscal year 2020-21,” he said.

The export value of hosiery products rose from $2.8 billion in FY20 to $3.8 billion in FY21.

“Knitwear exports recorded an increase of 36.6% despite the adverse impact of the Covid-19 pandemic,” he said. “The segment also emerged as the highest foreign exchange earner, of $3.81 billion, in the previous fiscal year.”

Mr Bilwani elaborated that the foreign exchange earned by the sector was 25.83% higher than the export revenue earned from exports of readymade or woven garments and 37.68% more than the receipts for bedwear exports.

“If the export of knitted bedsheets and fabric was included, the total foreign exchange earned by the knitwear sector would soar to $4.5 billion, accounting for 29.2% of the entire textile group and 17.91% of the total exports,” he said.

Bilwani asked Prime Minister Imran Khan to focus on the knitwear sector as it had the potential to enhance exports manifold. Bilwani pointed out that major exports of Bangladesh included knitwear products as well and they covered 43.66% of total exports of that country. He also mentioned that the annual global demand for knitwear stood at $208 billion but Pakistan’s share in the global knitwear exports stood at a meagre 1.83%.

He was, The Express Tribune said, of the view that Pakistan had the resources to enhance hosiery exports within a short time frame. He, however, regretted that the government had failed to hold consultations with stakeholders of the knitted garments sector on boosting exports while officials belonging to the rest of the textile chain were invited for meetings.