Pakistan’s textile exporters say the country’s high borrowing costs are making it harder for local manufacturers to compete with rivals in China, India and Vietnam, where businesses can access industrial loans at lower rates.
The Pakistan Textile Exporters Association (PTEA) raised the concern after the State Bank of Pakistan increased its policy rate by 50 basis points to 12 percent, warning that the decision would add to the industry’s already high production costs.
PTEA Chairman Rehan Naseem Bharara said expensive financing, energy and other inputs were squeezing exporters. He warned that higher interest rates would raise working-capital costs and discourage investment.
Bharara said industrial loans in India carry annual rates of around 9.25 to 9.6 percent, while machinery and small and medium-sized enterprise (SME) loans range from 8.5 to 12.5 percent. In Vietnam, some supporting-industry SMEs borrow at 8 to 10 percent.
China offers significantly cheaper financing, with average lending rates for general business loans at 3.04 percent. Loans for technological upgrades carry rates of around 2.7 percent, potentially falling to an effective 0.85 percent after government subsidies, he said.
Bharara argued that Pakistani exporters are competing internationally while facing much higher financing costs than some of their regional rivals. He called for measures to lower production costs and support export growth.
PTEA Vice Chairman Haris Yousaf said exporters were already struggling to finance daily operations, buy raw materials and pay other expenses. Higher borrowing costs could further weaken their competitiveness and undermine the government’s export-led growth plans.
He also warned that a prolonged decline in exports could slow economic growth, reduce funds available for development and make it harder for Pakistan to meet its external debt obligations.
Shipping costs have risen by nearly 200 percent, according to Yousaf, adding another burden for exporters. He said small and medium-sized enterprises, which contribute around 45 percent of Pakistan’s GDP, need easier access to financing to expand and remain sustainable.
The association called for an export-focused policy that treats the textile industry as a connected value chain rather than imposing separate taxation measures on different parts of the sector.
