Pakistan’s textile exporters say the country is making it harder for them to compete globally, as high production costs and expensive industrial loans put local manufacturers at a disadvantage against rivals in India, Vietnam and China.
The Pakistan Textile Exporters Association (PTEA) has criticized the State Bank of Pakistan for raising its policy rate by 50 basis points to 12 percent because higher borrowing costs will add to the pressure on an industry already struggling with expensive energy and raw materials.
PTEA Chairman Rehan Naseem Bharara said the rate increase would make working capital more expensive, discourage investment and weaken exporters’ ability to compete in international markets.
He added that the actual cost of borrowing for Pakistani businesses rises further once banks’ spreads are included.
He said industrial term loans in India carry annual rates of around 9.25 to 9.6 percent, while machinery and small and medium-sized enterprise (SME) loans range from 8.5 to 12.5 percent.
In Vietnam, SMEs in supporting industries can borrow at rates of 8 to 10 percent.
China offers even cheaper financing, with the average lending rate for general business loans at 3.04 percent.
Loans for technological upgrades carry rates of around 2.7 percent, which can fall to an effective 0.85 percent after government interest subsidies, he said.
Bharara argued that Pakistani exporters are being forced to compete with businesses in China and Vietnam that have access to substantially cheaper capital. He called for coordinated steps to reduce production costs and support export-led growth.
Exporters Warn of More Pressure
PTEA Vice Chairman Haris Yousaf said exporters were already struggling to finance daily operations, purchase raw materials and cover other expenses.
Higher interest rates would make these challenges worse and could undermine the government’s export-led growth plans.
Yousaf also warned that a prolonged decline in exports could slow economic growth, reduce funds available for development spending and weaken Pakistan’s ability to meet its external debt obligations.
Shipping costs have also increased by nearly 200 percent, he added.
Yousaf said SMEs, which contribute around 45 percent of Pakistan’s gross domestic product, need easier access to financing to expand and remain sustainable.
More expensive loans could discourage investment and further constrain business activity.
PTEA called for an export-focused policy framework that treats the textile value chain as an interconnected industry rather than targeting its different parts through separate taxation measures.
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