Pakistan Economic Outlook

Pakistan Economic Outlook (PEO): 2025–2028 — Where Pakistan Fits in Your Apparel & Textile Mix

If Guatemala is the speed hub for North America, Pakistan is the cotton-and-capacity engine of South Asia. For brands balancing tariff risk, cost control, and category depth (denim, bed & bath, basics), Pakistan remains a high-leverage node—especially into the EU/UK—and a useful complement to your near-shore network.

Why Pakistan still matters

• Category depth & verticality. Pakistan’s ecosystem spans ginning → spinning → weaving/knitting → dyeing/finishing → cut & sew at industrial scale, with long strengths in denim, towels, and bed linen, plus knit basics. Government and multilateral snapshots still place textiles at ~55–60% of national exports and ~40–45% of industrial employment, underscoring sector scale and policy attention. TDAPUN Trade and Development (UNCTAD)Fibre2Fashion

• EU/UK market access. The EU remains the cornerstone: in 2024, textiles & clothing made up ~76% of EU imports from Pakistan, backed by GSP+ preferences; the status continues but is under active EU monitoring. The UK DCTS also offers reduced/zero tariffs with more liberal rules of origin rolling out into 2026. Trade and Economic SecurityAP NewsGOV.UK+1

What the numbers say

• Momentum in FY25: PBS monthly data showed new highs early in 2025; by May 2025 the textile basket was up ~7–9% YoY for FY25-to-date, with knitwear, bed-wear, towels, and RMG driving gains. CCF GroupXinhua NewsFibre2Fashion

• Where the demand is: The EU remains Pakistan’s largest consolidated buyer bloc; U.S. demand is steady but more concentrated in textiles & apparel. European CommissionCensus.gov

Headwinds to price in (and what to do)

1. Energy costs vs. the region. The industry’s competitiveness hinges on power/gas parity with peers. Pakistan’s RCET framework historically lowered electricity/LNG rates to competitive levels; the unwind has pushed tariffs above regional averages, squeezing margins—though there have been targeted seasonal reductions. Build scenarios with energy surcharges and time-of-use strategies.

2. Cotton supply volatility. After 2022 flood damage, output recovered but 2025/26 cotton is again revised lower (~4.8m bales) amid water constraints, implying higher import reliance for staple cotton. Lock fabric/cotton via indexed contracts; keep alternate origins approved.

3. EU compliance scrutiny. GSP+ monitoring cycles are live; non-compliance risk is margin risk. Keep third-party social & environmental audits current and map tier-2/3 dyehouses.

4. U.S. small-parcel shock. The end of the U.S. de minimis exemption (effective Aug 29, 2025) rattled postal flows; for B2B containerized apparel, the fix is straightforward: broker-filed entries and delivered duty paid (PDDP) options via integrators. Review your sampling and DTC micro-fulfillment lanes.

Lead times & logistics reality

• To the EU: Karachi/Port Qasim to North Europe typically ~31–40 days port-to-port; stable weekly sailings. Great for towels, sheets, denim, replenishment basics.

• To the U.S.: Karachi to NY/NJ ~35–42 days (service- and routing-dependent). Air is viable for high-value capsules. Anchor buying calendars to 90–120 day PO-to-DC cycles for fashion basics.

Where Pakistan slots into your 2025–2028 line plan

• Denim platforming: Use Pakistan for fabric development (weft yarns, casts), bulk cut-and-sew, and laundry at scale; reserve near-shore (e.g., Guatemala/Mexico) for quick in-season tops or fashion graphics.

• Home textiles & towels: Pakistan remains a global price-to-quality leader in terry and bed-linen. Tie contract pricing to cotton indices with collar/floor mechanisms.

• Knit basics: Pre-position greige; finalize dye lots near ex-mill as EU orders firm up. Combine with UK DCTS for UK distribution nodes.

Ops playbook (practical)

• Dual calendars. Run an EU-first denim/home-textile calendar (Pakistan) and a NA quick-turn tees/fleece calendar (near-shore) to balance speed and scale.

• Energy-aware SMV. Engineer lines for lower kWh per unit (dryer loads, heat recovery, right-first-time dyeing) to blunt tariff volatility pass-through. APTMA

• Risk trims. Add 2–3 strategic vendors in Sindh & Punjab, plus one contingency in a second country; hold a rolling 3-month greige buffer on your top 10 SKUs.

• Compliance lift. Treat EU GSP+ monitoring like a customer audit: publish CAPA close-rates, train on grievance mechanisms, and maintain auditable wet-processing logs. AP News

The PEO takeaway

Pakistan won’t replace your near-shore speed, but it amplifies your margin and category depth—especially for denim, fleece and home textiles, and for U.S.-bound replenishment basics with disciplined calendars. In a world of tariff whiplash and tighter parcel rules, pairing Pakistan scale with regional speed is the most resilient play for 2025–2028.

Useful Links for Further Reading:

1. EU–Pakistan trade snapshot & GSP+ status. Trade and Economic Security

2. EU factsheet (Eurostat Comext) on 2024 trade flows. European Commission

3. UK DCTS: scheme details & rules-of-origin update (July 2025). GOV.UK+1

4. IMF on Pakistan’s reform priorities (May 2025). IMF+1

5. USDA (FAS) cotton update for 2025/26. USDA Apps

6. APTMA/RCET competitiveness analyses (energy). APTMA+1

7. PBS export momentum (Jan–May 2025) via Xinhua/industry trackers. Xinhua NewsCCF Group

8. Transit-time references (Karachi → EU/US). Fluent Cargo+1

9. De minimis change & postal impacts. DHL Group