Pakistan’s exports increased 26% to $2 billion in the month of July as compared to June, according to a report by the Intermarket Securities.
The country’s exports had declined to $0.96 billion due to the lockdowns imposed because of the coronavirus pandemic, but since then they have shown a sharp recovery.
Pakistan is one of the few countries that witnessed an increase in exports post-lockdown. Textile exports, which had 65% share in the country’s overall exports, crossed $1 billion mark in July to reached $1.27 billion. They were up by 33% on a month-on-month and 14% on a year-on-year bases.
“This is also nearly the highest level of monthly textile exports for Pakistan,” the Intermarket Securities said in its report. “Textile exports were expected to rebound strongly given a favorable mix in the present scenario, more home and healthcare textiles than garments and Pakistan being able to competitively price.”
The main reason for the recovery in textile exports was lifting of lockdowns globally. Both retail sales and unemployment levels have improved in North America, the UK and Europe, which are top destinations for Pakistan’s textile exports.
Textile imports dropped 12% to $0.17 billion on a month-on-month basis. But they were 5% higher on a year-on-year basis. Raw cotton imports declined 90%. This is potentially due to cotton being more expensive internationally than locally.
The country’s exports are likely to increase, the report says. The demand for home textiles is likely to remain stronger against readymade garments, due to continuing COVID-19 restrictions in the West.
The textile sector has rallied 32% since April due to improved export orders. An extension of the current trend could help continue the rally.
“We do highlight, however, profit margins will likely be lower than before the pandemic as exporters have to maintain customers, while demand abroad remains frail,” the Intermarket Securities said.
“The worsening of second waves in the US and Europe is a key risk factor for the sector in our view.”