Pakistan is experiencing its worst economic crisis amidst food shortages, flash floods, and poverty. As the government of Pakistan failed to end the economic crisis in Pakistan, over 7 million workers in its textile industry have been laid off. The country’s textile associations have blamed the mass layoffs on the Shehbaz Sharif government’s incompetence and shrinking exports.
Once a thriving industry is now on verge of closure as multiple textile units have been closed already with several others planning to shut down or move their production abroad.
In 2021, Pakistan’s textile exports amounted to $19.3 billion (€17.8 billion), accounting for more than half of the nation’s total exports. However, due to the shortage of cotton, the country’s small textile mills and production facilities that make bedsheets, towels, and denim for consumers in Europe and the US have now been closed. The industry is also faced with a tax raise.
Due to depleting foreign exchange reserves, thousands of shipping containers containing raw materials, medical supplies, and food items are stuck at Karachi port.
According to the State Bank, Pakistan’s foreign exchange reserves last week dropped to $4.3 billion, the lowest level since February 2014.
A cash-strapped and desperate Pakistan in a bid to revive the long-awaited International Monetary Fund (IMF) bailout programme has agreed to accept all the conditions laid down by the IMF. Islamabad has also requested the IMF to send its mission to conclude the USD 6 Billion bailout programme which was initially agreed upon in 2019. It is, however, highly unlikely that the IMF would release the funds, at least not till the Pakistani government fulfills its pledges.
Notably, the seventh and eighth reviews of Pakistan’s bailout program were approved by the IMF board in August of last year, allowing for a release of more than USD 1.1 billion.
Labor unions are now protesting the textile industry’s mass layoffs and demanding that workers be paid their unpaid wages.
Other than this, Pakistan, which was declared as South Asia’s weakest economy by a report is also hit by a severe food crisis. The situation in several cities of Pakistan is so grave that flour is being rationed and guarded by armed guards. Prices of flour and wheat have witnessed a dramatic surge.
Pakistan’s Khyber Pakhtunkhwa, Sindh, and Balochistan are among the worst sufferers as tens of thousands spend hours daily to get the subsidized bags of flour that are already short in supply in the market.
Incidents of clashes and stampedes have been reported in markets in many areas of Khyber Pakhtunkhwa, Sindh, and Balochistan. The situation is so dire that flour-loaded mini trucks and vans are escorted by armed guards to avoid clashes. As these vehicles reach the markets, people gather around these vehicles.
Irony died a painful death as even in the midst of the severe economic crisis, the Pakistani government has prioritized importing expensive luxury BMW cars for its cabinet ministers instead of focusing on measures to increase exports.
The essential raw materials and accessories are not being provided to textile factories. In-process export orders worth $500,000 per consignment are being affected by the rejection of letters of credit (LCs) worth as little as $5,000. Export orders have been canceled as a result of the severe disruption and production delays that have been caused.
Exporters are concerned that international orders may get canceled as a consequence of the government’s ongoing policy of blocking LCs.
