Pakistan's cotton imports plunge, easing trade deficit concerns

The IMF's forecast of a high trade deficit for Pakistan in 2023-24 appears significantly off-track. This is partly due to a surprise collapse in cotton imports, which used to be a major expense. While the IMF predicted import costs of $65 billion, the actual figure is expected to be closer to $55 billion. A key reason is the drop in raw cotton imports, down from $1.5 billion in previous years to a projected $200 million in 2023-24. This drop is despite Pakistan's status as a cotton importer and a shortfall in domestic production.

The cause of this decline is not an increase in domestic production, rather a slowdown in the textile industry. High energy costs have made Pakistani mills less competitive, leading to a slump in yarn output. This reduced demand for cotton has overshadowed any domestic production gains.

If Pakistan's cotton crop performs adequately next year, import needs are likely to stay low, offering relief for those managing the country's external finances. However, with the monsoon season approaching, uncertainty remains about the future of the cotton industry.