This year’s cotton harvest has declined by more than 33 percent compared to last year, indicating a need to import more than 3 million bales to meet the domestic demand of textile companies.
Annually, Pakistan harvests cotton from August through December, with the peak occurring in October. Sindh and Punjab comprise the bulk of the cultivation. This year’s harvest has totaled 5.19 million bales compared to the 7.75 million bales harvested during the same period last year. This reflects a worrying trend, persisting for almost a decade, in the decline of cotton production. There are various reasons for this, ranging from climate change-induced floods to farmers shifting to the more-profitable sugar cane, and even the development of agricultural land into housing schemes.
Pakistan is ostensibly an agrarian economy, with the incumbent government repeatedly claiming it will support farmers in modernizing agricultural practices. However, it has paid little heed to the economic losses incurred due to the decline in cotton production. Despite a marginal improvement over the past two years, Pakistan’s foreign exchange reserves remain at a worryingly low $16 billion. The government has sought to address this issue through import restrictions, but cannot afford to block cotton imports at the risk of crippling its export-oriented textiles sector. Over the past decade, the country has spent nearly $10 billion to import cotton to keep local textile mills running.
Pakistan’s nadir of cotton harvest occurred in 2022 when devastating floods left the country with just 4.9 million bales amidst overall agriculture growth of 2.3%. Those floods inflicted losses of roughly $30 billion spread across various sectors, with the country yet to fully recover from the disaster.
Over the past five years, according to government data, the country imported $5.6 billion worth of cotton to meet the requirements of textile companies. This is despite a noticeable decline in the demand of local mills due to the prevailing economic crisis, higher interest rates and hefty utility bills. In fiscal year 2017-18, textile companies required more than 15.5 million bales of cotton; this had declined to nearly 9 million bales in fiscal year 2022-23. The sector has become less desirable with the withdrawal of cross-subsidies, a precondition of the $7 billion International Monetary Fund (IMF) bailout the country inked earlier this year.
The fall from grace becomes starker considering Pakistan was once the world’s fourth largest cotton producer. In the current fiscal year, per estimates, the country’s cotton import bill could reach $1.9 billion, as it needs 3-3.5 million bales to make up the anticipated shortfall. The country has already imported nearly 1.2 million bales thus far this year, mainly from the U.S., Tanzania, Brazil and even Afghanistan.
If Pakistan is to overcome its cotton crisis, the government must devise and adopt a stringent policy for the textile sector. Boosting cotton production would not only help farmers, but also effectively curtail imports for the textile sector, lessening the burden on the country’s foreign exchange reserves.