‘No formal meeting’ held between Pakistan and India at SCO summit, says foreign office

KARACHI: Cash-strapped Pakistan’s cotton imports are set to surge this year as irregular weather patterns brought about by climate change effects have significantly lowered production, financial analysts and cotton experts said on Wednesday. 

According to the Pakistan Central Cotton Committee, factories in Pakistan have received 5.51 million bales of cotton as of January this year, a significant decline of 34 percent compared to last year.

Pakistan’s eastern Punjab province, which produces the most cotton out of all provinces in the country, grew 2.7 million bales, showing a decline of more than 36 percent compared to last year.

“The biggest reason for this fall [in cotton production] is climate change,” Khalid Abdullah, Pakistan’s former cotton commissioner, told Arab News. 

Pakistan is recognized as one of the world’s most vulnerable countries to climate change, where over 1,700 people were killed in 2022 after torrential rains triggered flash floods. Islamabad is negotiating for additional financing of $1 billion to $1.5 billion from the International Monetary Fund (IMF) to strengthen climate resilience. 

Abdullah said the early cotton sowing method had proved very successful in terms of production in 2023. However, he said when farmers planted cotton after Feb. 15 this year, some of the plants died as the temperature suddenly dropped and it rained in some areas.

“The farmers had to replant cotton which resulted in extra costs on account of seeds and sowing charges,” Abdullah explained

He said re-sowing cotton also resulted in delays which decreased the time window during which cotton remains free from viruses, further impacting its yield. 

Abdullah said another reason for a dismal crop yield this season was the price disruptions caused in the local market, adding that they restricted farmers from investing in cotton, with the government not offering any support price. 

Market uncertainties dampened farmers’ confidence further, who spent less on fertilizer and plant protection measures, he said. 

Financial analysts pointed out that a drop in cotton production would mean the country would spend more on cotton imports this year to support its huge textile industry. 

Textile is a massive earner for Pakistan. During fiscal year 2024, Pakistan exported a whopping $16.7 billion worth of textile goods, according to the Pakistan Bureau of Statistics. 

To attain these export figures, the country had to import $448 million of raw cotton. This figure was 73 percent lower than $1.68 billion that Pakistan spent on raw cotton imports in FY23.

“Naturally imports are going to be higher due to lower local output of cotton,” Muhammad Waqas Ghani, head of research at Karachi-based investment banking firm JS Global Capital Ltd., told Arab News. 

Naseem Usman, a cotton analyst and chairman at the Karachi Cotton Brokers Forum, said in a report that Pakistan’s cotton import bill could surge to as high as $5 billion this year. 

“This serious drop in cotton production is forcing textile spinners to increase their dependence on imported cotton,” Usman said. 

Rising imports can cause headaches for cash-strapped Pakistan, which is trying to navigate a tricky path to economic recovery from a prolonged macroeconomic crisis by undertaking financial reforms, cutting back on imports and increasing exports. 

Agriculture has an impressive contribution of about 24 percent to Pakistan’s Gross Domestic Product (GDP) and accounts for nearly half of the country’s employed labor force. 

Currently, the South Asian country has $11 billion in foreign exchange reserves, enough to finance about two months of imports only. 

The IMF, which is currently reviewing Pakistan’s economic progress as part of the $7 billion Extended Fund Facility (EFF) program, wants Islamabad to have an import cover of at least three months. 

Sensing the gravity of the situation, Prime Minister Shehbaz Sharif formed the Committee on Cotton Crop Production Enhancement, which held its first meeting in Islamabad on Mar. 11.

The food ministry said the committee’s primary focus was to take steps needed to increase cotton production in Pakistan, noting that it had decreased significantly. 

KARACHI: Moody’s, a leading global credit rating, research and risk analysis firm on Wednesday upgraded the Pakistani banking sector’s outlook from stable to “positive,” saying it reflected the country’s improving macroeconomic conditions. 

Moody’s Investors Service periodically issues assessment reports to help its clients protect themselves against economic and financial risks.

The assessment comes amid improving macroeconomic conditions in Pakistan, which include inflation slowing to a near-decade low of 1.5 percent in February. Pakistan expects to achieve 3.6 percent economic growth this fiscal year and hopes its foreign exchange reserves increase beyond $13 billion by June. 

“Moody’s Ratings has changed the outlook on Pakistan’s banking system to positive from stable to reflect the banks’ resilient financial performance as well as improving macroeconomic conditions from very weak levels a year ago,” the firm said in a statement. 

Moody’s said the positive outlook also mirrors the government’s Caa2 positive outlook, which the rating agency issued last August. It said Pakistani banks have had significant exposure to the sovereign through their large holdings of government securities, which account for around half of total banking assets.

However, the firm warned that Pakistan’s long-term debt sustainability remains a key risk with its still “very weak” fiscal position, high liquidity and external vulnerability risks.

“We expect the Pakistani economy to expand by 3 percent in 2025, compared with 2.5 percent in 2024 and -0.2 percent in 2023,” Moody’s said. 

It noted that inflation is also significantly easing in the country, which the rating agency said it estimated at around 8 percent for the year 2025 from an average of 23 percent in 2024. 

Moody’s said Pakistan’s problem loan formation will also slow as borrowing costs and inflation reduce, although net interest margins will narrow on the back of interest rate cuts. 

“Banks will maintain adequate capital buffers, supported by subdued loan growth and solid cash generation, despite dividend payouts remaining high,” it said. 

Pakistan has undertaken financial reforms related to its energy and tax sectors and attempted to privatize its loss-making enterprises in line with the IMF’s demands.

Moody’s rating upgrade takes place as a staff mission of the International Monetary Fund (IMF) is in Pakistan to hold its first review of the country’s economic performance under its $7 billion Extended Fund Facility (EFF) program.