Import of raw cotton to cost $1.5 billion

Tag : cotton



Import of raw cotton to cost $1.5 billion


By Shahid Iqbal

KARACHI, Sept 22: While the foreign exchange is running out, it maybe difficult for the country to spend a huge sum of about $1.5billion on import of raw cotton.

The textile sector, which earns over 60 per cent of total exportproceeds for the country, needs additional imported cotton worth$1.250 to $1.50 billion for the new fiscal year.

Both the US Department of Agricultures World Agricultural Supplyand Demand Estimates for September 2008 and the InternationalCotton Advisory Committee (ICAC) have predicted a significantreduction in world cotton production and observed that Pakistanwould be one of the low producing countries.

Last year, the country had to import raw cotton worth $1.101billion when it faced a shortage. The problem is more intense thisyear than last year.

The cotton prices in the international market have gone up by over40 per cent compared to last year as the world bodies watchingcotton production, have predicted a global shortage of cotton.

The country is facing a serious shortage of foreign exchange andthe reserves are not enough to finance import of petroleum productsfor this year.

Analysts said any effort to discourage import of raw cotton wouldmake an impact in two ways. First the exports would drop with afurther widening of the trade deficit; secondly, there would be aslow economic growth, with the possible laying-off of thousands ofworkers in the textile industry.

During July and August, the country imported raw cotton worth$93.65 million, which reflected a complete awareness of the textilesector regarding cotton shortfall.

During this period, arrival of cotton in the domestic market wasnonstop.

The imported raw cotton would be translated into exportableproducts to attract more dollars than the investment initiallyrequired for raw cotton import.

However, currency experts and analysts said the outflow of $1.5billion would cost much more to the country. They said with anoutflow of each dollar from the reserves, the rupee gets weaker.

The historic fall of rupee suggests that the rupee gets weaker withshrinking reserves.

The rupee continued to shed its weight since the fall of reservesin October 2007 when it touched a peak level of over $16.5 billion.The rupee lost 24 per cent since January 2008.

What is more serious about the shortfall of cotton production isthat the country is unable to import raw cotton or in other wordsit is unable to finance this import for textile which is thebackbone of the economy, said an analyst.

He said that the economy is already under severe internal andexternal pressures, and any addition in it would aggravate thesituation, making it more difficult for the survival of economy.

The newly-elected government trapped by the situation is makingefforts to get Saudi oil on deferred payment, get soft loans fromfriendly countries and to get loans from donors, like the IDB, theWorld Bank and the IMF.

The finance minister had recently denied that the government wasgetting IMF help, but the IMF delegations have been in Islamabad,meeting high-ups, which is an indication that the IMF is alreadyactive to clear the path for its entry.