Page 19 - CMA Journal (May-June 2025)

Exclusive Interview

ICMA: Textile exports have dropped in recent months.
What are the main reasons for this decline, and what
urgent steps should be taken to boost export
performance? Tightened SBP import controls
Kamran Arshad: Textile exports are expected to and restrictive LC quotas have
increase by 6% to 7% YoY in the current financial year,
from $16.7 billion in FY24 to $17.9 billion in FY25. We restricted raw-material supplies,
have seen somewhat mixed trends this year, with strong
YoY growth of up to 20% in monthly exports during the disrupted production schedules,
first half, but in April and May 2025 there was a marginal
decline of 1.29% and 3.85% YoY. Keep in mind, there is and incurred demurrage costs,
also a base effect during the latter part of the year as
exports had started to recover towards the end of FY24. leading to financial losses as well
Overall, what we are seeing is a slow recovery rather than as lost export orders
growth as annual exports remain well below the $19.3
billion achieved in FY22. It is also important to point out
that net exports—the difference between textile sector
exports and imports, a proxy for local value addition in
exports—will decline from ~$14.0 billion in FY24 to lost export orders. Where LCs are allowed, payment
~$13.6 billion in FY25 (based on FY25 10 months against registered documents has been regularly
data)—due to the surge in imported inputs as local delayed by banks, causing both operational and
supplies are disadvantaged by the 18% sales tax reputational issues for industry. Expanding FX windows
disparity under EFS. for textile inputs, deploying an online LC-tracking
dashboard, and decentralizing LC approval authority
All in all, these trends reflect a convergence of domestic would restore supply-chain reliability.
and external headwinds. Domestically, while the
business environment and economy have certainly ICMA: APTMA has long demanded the return of the
improved compared to FY23 and FY24, exporters ‘no payment, no refund’ system to ease liquidity
continue to face punitive advance turnover taxes, high problems. Was this proposal considered in the recent
energy costs—nearly double regional benchmarks— budget? What’s the way forward now?
and recurring raw-material shortages worsened by
Kamran Arshad: So long as the IMF is in the driving seat,
restrictive import controls and LC-opening delays. These
re-introducing the ‘no payment, no refund’ system is not
factors inflate input costs, squeeze margins, disrupt
feasible. All exemptions and zero-ratings have been
production schedules, and result in a long-term negative
withdrawn across the board, especially for exporters. We
impact on businesses and their exports.
engaged with IMF staff and other government
Externally, heightened policy uncertainty—most stakeholders, and the IMF staff report confirms there is
recently the U.S. “Trump tariffs”—has chilled consumer no policy space for such schemes.
sentiment in our largest markets, the U.S. and the EU,
The first-best solution would have been to restore
prompting buyers to delay or cancel orders. Volatile
zero-rating on domestic inputs throughout the value
global demand compounds our exporters’ challenges,
chain—or, even better, reinstate SRO 1125. In the
leaving them overexposed to a small number of
absence of that option, the only way to level the playing
destinations.
field for local industry is to apply the same sales-tax
ICMA: Import restrictions and delays in opening LCs regime to all imports. Thankfully, as already discussed,
have been widely reported. How have these issues the government is imposing sales tax on cotton, yarn
affected the availability of raw materials and your and griege cloth in the upcoming budget.
supply chain operations?
The Editorial Board thanks Mr. Kamran Arshad, Chairman, All
Kamran Arshad: Tightened SBP import controls and Pakistan Textile Mills Association (APTMA) for sparing his
precious time to give exclusive interview for Chartered
restrictive LC quotas have restricted raw-material
Management Accountant Journal.
supplies, disrupted production schedules, and incurred
demurrage costs, leading to financial losses as well as

ICMA’s Chartered Management Accountant, May-June 2025 17