Pakistan's textile units shut down due to shortage of cotton after floods

The already fragile Pakistan economy, hit hard by the devastating floods, now faces the shutdown of textile factories as the cotton crop has been destroyed.

Cotton shortage has forced the owners to shut down textile factories after the floods. The mill closures underscore challenges for the sector that employs about 10 million people, accounts for 8 per cent of the economy and adds more than half to the nation's export earnings, reported Geo News.

While the larger firms are less affected as they are well stocked, Pakistan's small factories making bedsheets and towels for export to the US and Europe have started to shut down, The News reported.

Pakistan Textile Exporters Association's patron-in-chief Khurram Mukhtar said that a shortage of good quality cotton, high fuel costs, and poor recovery of payments from buyers are the reasons behind the closing of small textile mills.

Mukhtar said that larger firms supplying global companies like Nike, Adidas AG, Puma SE, and Target Corp are well stocked and hence, they are less affected, reported Geo News.

The recent floods, which submerged a third of Pakistan, killed more than 1,600 people, and damaged about 35 per cent of the cotton crop, reported Geo News.

The latest blow comes at a difficult time for the South Asian nation already struggling with high inflation and falling currency reserves.

Due to an "unforeseen downturn in the market and unavailability of good quality cotton" following heavy rains and floods, the company's mills have been temporarily closed, Faisalabad-based AN Textile said in an exchange filing earlier this month, reported Geo News.

Cotton production in Pakistan could slump to 6.5 million bales (of 170 kilograms each) in the year that started in July, compared with a target of 11 million, Mukhtar said.

That could force Pakistan to spend about USD 3 billion to import cotton from countries such as Brazil, Turkey, the US, East and West Africa and Afghanistan, said Gohar Ejaz, patron-in-chief of All Pakistan Textile Mills Association.

About 30 per cent of Pakistan's textile production capacity for exports has been hampered because of cotton and energy shortages, Ejaz said.

Pakistan's textile sector, which exports about 60 per cent of its production, is also facing poor demand in the domestic market due to fragile economic conditions.