Textile sector: exports rise, cotton recovery on the horizon

Pakistan’s textile sector showed modest growth in FY25, with total exports increasing by 7% year-on-year, reaching USD 17.9 billion (vs USD 16.7 billion in FY24). This rebound was powered by stronger performance in value-added products like knitwear, bed linen, and ready-made garments, key pillars of Pakistan’s textile exports.

In June 2025 alone, monthly textile exports clocked in at USD 1.52 billion, up 8% YoY, although slightly down by 1% compared to May. Major contributors to this monthly growth included:

• Cotton Yarn: +37% YoY
• Knitwear: +6% YoY
• Bedwear: +17% YoY
• Garments: +11% YoY

On the other hand, cotton cloth exports fell by 9% YoY, pointing to challenges in the basic textile segment. Despite this, value-added exports rose by 9% YoY, a positive signal for long-term profitability.

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Cotton supply: short-term pain, long-term optimism

Cotton arrivals have seen a sharp 33% YoY drop as of July 2025. While Punjab posted a healthy 27% increase due to early sowing, Sindh suffered a 53% YoY decline, primarily due to poor weather.

Pakistan’s cotton imports surged 1.8x YoY to USD 1.2 billion, underlining the widening supply gap. To support the local market, the government is considering removing the 18% sales tax on local cotton, a move that could boost domestic competitiveness.

Looking ahead to FY26, cotton production is expected to recover, aided by:

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• Early sowing in Punjab
• Increased cultivation area
• Better crop yields

This could stabilize local cotton prices and reduce dependency on imports, good news for textile manufacturers.

Policy update: leveling the playing field

One major issue remains: local cotton is taxed at 18%, while imported cotton is tax-exempt. This policy imbalance hurts domestic farmers and local spinners. Policymakers are now looking at revising this to support the local cotton industry.

Takeaway for investors

Pakistan’s textile industry is showing resilience. Strong value-added export growth, recovering global demand, and expected improvement in local cotton output set a positive tone for FY26. However, structural issues like tax policy and weather-related crop volatility remain key risks.

If cotton yields recover and policy support materializes, textile stocks could offer upside in FY26, especially those with strong exports in value-added segments.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →