17-Day closure of cotton exchange triggers market crisis

Warnings mount that the extended closure of the Karachi Cotton Exchange may trigger a full-scale crisis in the textile sector, which would undermine export targets and retard economic growth. Representatives from the industry said the disruption has already started to erode confidence across the value chain of cotton and textiles.

It has almost been 17 days since the KCE stopped working after the EPTB suddenly seized its premises on December 12. The move effectively shut the doors on an institution that had operated without interruption for 52 years despite claims by the government of facilitating ease of doing business, economic growth, and a $60 billion export target.

The decision has directly hit some 320 registered cotton brokers, who have estimated losses running into billions of rupees due to a complete halt in trade. The spinning mills and other textile units are facing severe problems in arranging bank finance in the absence of official cotton rates.

Cotton spot rates have not been issued, a practice disrupted since the EPTB assumed control of the building. This has disrupted price discovery in a sector accounting for nearly 60 per cent of the country’s export earnings and supporting up to 70 percent of direct and indirect employment nationwide.

"I don't understand why the federal government and the minister of finance have stayed away from this matter so far," he said, requesting anonymity. He termed the confiscation of the exchange building as a drastic measure which has not been pursued with due urgency at the policy level.

"The thing that is surprising is how such a drastic step was even allowed to happen in the first place, and even more disturbing is the fact that the problem has been left to snowball into a full-blown crisis," added the broker.

At the same time, the efforts to get a word from the chairman of the Karachi Cotton Association did not succeed as he has neither responded to calls nor issued any statement publicly regarding the takeover of the KCE premises.

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