The State Bank of Pakistan (SBP) noted in its half-year economic report for fiscal year 2025-26 that the country's textile industry is facing increasing pressure from tightening environmental regulations in major markets such as the EU, and that if the approximately 1.7 million tons of textile waste generated annually can be effectively recycled and utilized, it could bring export earnings worth $773 million.

The report states that the EU consumes 40% of Pakistan's textile exports and is implementing circular economy frameworks such as the Ecodesign for Sustainable Products Regulation (ESPR). In addition, the EU's Carbon Border Adjustment Mechanism (CBAM) is expected to expand to the textile industry before 2030, putting pressure on Pakistan's export competitiveness. Currently, more than 80% of Pakistan's textile exports are concentrated in the EU, the US, and the UK, and these markets are rapidly implementing ESG procurement, climate disclosure, and product traceability rules.

SBP estimates that if 850,000 tons (i.e., half of the textile waste) were formally collected and processed, even using basic mechanical recycling (yielding 65% usable fiber), it could be made into high-quality recycled bleached fiber worth an average of $1.4 per kilogram. This would not only reduce dependence on imported virgin fiber and lower the carbon footprint, but also help meet international traceability requirements.

Pakistan's second-hand clothing market already has a successful example: it imports $180 million worth of used textiles annually, and after sorting and upgrading, re-exports them to low-income countries for $266 million. However, about 90% of domestically collected textile waste can currently only be "downcycled" into low-value products such as mops or cleaning cloths, due to a fragmented recycling system, dominance by informal waste pickers, and a lack of technical sorting facilities.

To this end, SBP recommends that the government formulate a "National Textile Circularity Roadmap" aligned with the timelines of international alliances, including establishing digital product passports (DPP) to track material flows, training and certifying formal waste handlers, and accelerating private investment in chemical recycling and AI sorting systems.

Source: Pakistan’s textile waste could unlock $773m export opportunity · Originally published on 2026-08-19