Gas shortage hits Pakistan’s exports and increases economic pressure | Business and Economic News

After factories in Punjab State had to close for 15 days due to fuel shortages, textile exports lost approximately US$250 million last month.

Pakistan’s natural gas shortage is damaging its most important export industry, putting more pressure on an economy that is already struggling with accelerating inflation and a weak currency.

Shahid Sattar, executive director of the All Pakistan Textile Mills Association, said that after 15 days of forced closure of textile mills in Punjab, textile exports lost approximately US$250 million last month. He said that factories in the province rely on regasification imports of liquefied natural gas, while domestic supply is shifting to other regions.

With the reduction in local supply in the past few years, Pakistan has become a fast-growing LNG import market. However, due to global shortages, competition for raw materials for electricity and fuels for heating and cooking has intensified, causing spot prices to reach levels that Pakistan cannot afford.

The textile industry—from denim jeans to hats to buyers in the United States and Europe—is one of the country’s few economic highlights. Government data show that in the nine months to March 2021, production has increased by nearly 6%, and the industry accounts for 60% of total exports.

“High oil prices are prohibitive,” Sattar said in an interview. “The shortage of supply is due to the inability of the Ministry of Energy to arrange supply, which is damaging the future of Pakistan’s exports and economy.”

According to government data, the country exported $11.4 billion in textiles in the nine months ending March 2021. According to Bloomberg’s calculations, based on these figures, 250 million US dollars may account for about 20% of Pakistan’s textile exports last month.

At critical economic and political junctures, gas shortages are hitting Pakistan. The country is struggling to cope with accelerating inflation and weak currency, and support for Prime Minister Imran Khan’s ruling party weakened before the 2023 national election. The government also needs to raise taxes and has just raised the gasoline price tax as a condition for pre-resuming its $6 billion rescue plan with the International Monetary Fund.

Department of Energy officials did not respond to calls seeking comment.

Pakistan is entering the coldest month of the year. After suppliers withdrew from delivery amid soaring prices and a surge in global demand, Pakistan issued an emergency tender in November to request the import of more LNG. Recently, the gas trader Gunvor told Pakistan that it could not deliver on January 10 as planned.

Energy Minister Hamad Azhar said at a press conference at the end of December that Pakistan’s natural gas fields are depleted by about 9% every year and imported liquefied natural gas is very expensive. The country faces a natural gas shortage every winter. Azhar said on Twitter on Friday that Pakistan announced a round of tenders to help find more oil and gas reserves.

Sattar said the government resumed natural gas supply to the textile industry last Wednesday, but frequent power outages are still curbing operations. He said that if the situation continues, the factory will only be able to operate at about 80% of its capacity.

“Our history is full of’stopping’ growth caused by energy shortages and high costs, both of which are the result of government mismanagement,” Sattar said.

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