Interest Rate and Input Cost: Impact on the Performance of the Textile Industry in Pakistan

This study empirically investigates the influence of interest rates and input costs on the financial health of Pakistan's textile sector, utilizing 16 years of firm-level data (2008–2024). Profit margin served as the key performance indicator, with interest rates and input costs constituting the primary explanatory variables. Data were systematically extracted from audited annual financial statements and the Pakistan Stock Exchange. Robust econometric methodologies—including correlation analysis and multiple regression—were deployed to assess both short-term dynamics and long-term equilibrium relationships. Results conclusively demonstrate that elevated interest rates and increased input costs exert statistically significant adverse pressure on textile industry profitability. Each upward movement in these variables corresponds to measurable erosion in profit margins. The analysis underscores an urgent need for policy interventions targeting cost reduction mechanisms. Specifically, strategic measures such as transitioning to single-digit borrowing rates and rationalizing import tariffs on essential raw materials could substantially enhance sectoral competitiveness. Implementing these recommendations would strengthen Pakistan's export capacity and fortify foreign exchange reserves through improved textile industry performance.