By Azam Tariq

Pakistan’s value-added textile exports remained relatively resilient during the first half of FY26 despite an overall decline in exports and rising uncertainty in global trade markets, according to the State Bank of Pakistan’s Half Year Report 2025-26.

The report said Pakistan’s exports declined 5 percent during H1-FY26 even as global trade increased. The decline was led mainly by lower rice exports, falling global commodity prices, increased competition, and disruption caused by the closure of the western border.

Despite the broader slowdown in exports, the textile sector performed comparatively better than several other export categories.

According to the SBP, high-value-added textile exports remained relatively resilient during the review period, helping cushion the overall decline in exports.

The report noted that textiles and wearing apparel were among the major contributors to the recovery in large-scale manufacturing, which grew 4.8 percent during H1-FY26 after contracting over the previous three years.

The central bank attributed the improvement in textile-related manufacturing partly to higher exports and relatively lower US tariffs on selected textile categories.

Pakistan’s broader industrial recovery also supported the sector during H1-FY26.

Real GDP growth accelerated to 3.8 percent during the first half of FY26 from 1.9 percent a year earlier, while industrial growth reached 8.1 percent. Large-scale manufacturing alone expanded 4.8 percent compared with a contraction of 1.8 percent in the corresponding period last year.

The report said improved macroeconomic stability helped strengthen production activity across export-oriented industries.

Average inflation declined to 5.2 percent during H1-FY26 from 7.2 percent a year earlier, while the rupee appreciated by 1.3 percent during the review period.

Lower inflation, exchange-rate stability and easing borrowing costs reduced input-price uncertainty for exporters and improved overall business confidence.

The report also noted that benign global commodity prices helped reduce input costs for manufacturers during much of H1-FY26.

However, the SBP warned that Pakistan’s export structure remains vulnerable because of structural weaknesses within the economy.

According to the report, Pakistan’s export-to-GDP ratio has continued to decline over the last two decades due to low productivity, policy inconsistencies, weak integration into global value chains and limited product and market diversification.

The central bank said these weaknesses make exports vulnerable to price and demand shocks in international markets.

The report also highlighted emerging risks posed by changes in global trade and environmental regulations.

Pakistan’s textile sector remains heavily concentrated in traditional product categories with limited technological upgrading. The SBP stressed that expansion of the textile value chain through circular and sustainable production practices will become increasingly important for maintaining competitiveness in export markets.

At the same time, external risks linked to global trade tensions and the Middle East conflict continue to create uncertainty for exporters.

The report warned that rising freight charges, supply-chain disruptions, and slower global economic growth could weigh on exports during the remainder of FY26.

Despite these risks, the textile sector remains central to Pakistan’s industrial and export economy because of its contributions to manufacturing output, employment, and foreign exchange earnings.

The SBP stressed that Pakistan’s transition toward a more export-oriented growth model will depend heavily on improving productivity, technological upgrading and value addition within manufacturing sectors such as textiles.

Credit: INP-WealthPk