Pakistan Textile Industry Heartbroken After SBP Announcement

As high production costs and expensive industrial loans put local manufacturers at a disadvantage against rivals in India, Vietnam and China, pakistan's textile exporters say the country is making it harder for them to compete globally.

Key points

• SBP Hikes Interest Rate First Time Since June 2026.
• PTEA Chairman Rehan Naseem Bharara remarked the rate rise would create working capital more expensive, discourage investment and weaken exporters' ability to compete in international markets.
• In Vietnam, SMEs in supporting industries can borrow at rates of 8 to 10 percent.
• China offers even cheaper financing, with the average lending rate for general business loans at 3.04 percent.
• Bharara argued that Pakistani exporters are being forced to compete with businesses in China and Vietnam that have access to substantially cheaper capital.

In practice, the Pakistan Textile Exporters Association (PTEA) has criticized the State Bank of Pakistan for raising its policy rate by 50 basis points to 12 percent since higher borrowing costs will add to the pressure on an industry already struggling with expensive energy and raw materials. SBP Hikes Interest Rate First Time Since June 2026.

He continued that the actual cost of borrowing for Pakistani businesses rises further once banks' spreads are included.

While machinery and small and medium-sized enterprise (SME) loans range from 8.5 to 12.5 percent, he remarked industrial term loans in India carry annual rates of around 9.25 to 9.6 percent.

Loans for technological upgrades carry rates of around 2.7 percent. It can fall to an effective 0.85 percent after administration interest subsidies, he stated.

Bharara argued that Pakistani exporters are being forced to compete with businesses in China and Vietnam that have access to substantially cheaper capital. He pressed coordinated steps to reduce production costs and backing export-led expansion. Exporters Warn of More Pressure.

PTEA Vice Chairman Haris Yousaf remarked exporters were already struggling to finance daily operations, purchase raw materials and cover other expenses.

Higher interest rates would create these challenges worse and could undermine the government's export-led expansion intends.

Yousaf additionally cautioned that a prolonged decline in exports could slow economic expansion, reduce funds available for development spending and weaken Pakistan's ability to meet its external debt obligations. Shipping costs have additionally climbed by almost 200 percent, he went on. Ahsan Iqbal Approves Rs. 213 Billion for 4 Projects.

Yousaf remarked SMEs, which contribute around 45 percent of Pakistan's gross domestic product, need easier access to financing to expand and remain sustainable. More expensive loans could discourage investment and further constrain business activity.

PTEA pressed an export-focused policy framework that treats the textile value chain as an interconnected industry rather than targeting its different parts through separate taxation measures. Stay Connected with ProPakistani.

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For now, pakistan Textile Industry Heartbroken After SBP Announcement remains the part of the story worth watching, and further updates are likely as more details are confirmed.