Latest news with #ExportFinanceScheme
Business Recorder
12 hours ago
- Business
- Business Recorder
PBF urges govt to exempt local cotton, seed, yarn, fabrics from 18pc GST
LAHORE: The Pakistan Business Forum (PBF) has called on the federal government to exempt local Cotton, yarn, Fabrics, Oil cake, seed cotton and oil from the 18% General Sales Tax (GST) in the upcoming Federal Budget 2025–26, warning that the failure to do so could push the country's Agriculture and textile industry toward total collapse. PBF Chairman South Punjab, Malik Talat Suhail while talking to media emphasized that the Export Finance Scheme (EFS), introduced to phase out subsidies and promote exports, has instead proven detrimental to the textile sector. Under EFS, imported raw materials are exempted from both sales tax and customs duty, while local inputs continue to be taxed at 18%. Though this tax is technically refundable, in practice, only 60–70% of refunds are released. The refund process is plagued by delays, manual processing, and high costs—issues that disproportionately harm small and medium-sized enterprises (SMEs). This imbalance has led many exporters to favour imported inputs, causing serious damage to local suppliers. As a result, Pakistan's import of cotton, yarn, and fabric surged by $1.5 billion in FY 2025, climbing from $2.19 billion to $3.64 billion. In contrast, textile exports rose by only $1.4 billion and net textile exports are projected to decline from $14.0 billion to $13.6 billion. Over 120 spinning mills and more than 800 ginning factories have shut down, while protests from loom workers in Faisalabad are growing. SMEs are particularly vulnerable, as they face multiple tax payments at every stage of production and have limited access to cheaper imported alternatives, unlike larger firms. The current situation has placed severe pressure on the country's foreign exchange reserves, especially as the number of commercial import licenses has tripled from 800 to 2,400. Meanwhile, local cotton production has fallen to a historic low of just 5 million bales, with further declines anticipated. Due to a lack of government support and declining demand, many farmers are abandoning cotton cultivation in favour of more water-intensive crops, placing further stress on national water resources. PBF also warned that the collapse of the cotton economy is stripping rural areas of $2-3 billion in income, with women cotton-pickers among the hardest hit. 'Pakistan is currently the only country imposing an 18% sales tax on cottonseed and cotton feed, driving farmer income below the cost of production and hitting the poorest segments of society the hardest'. Rising unemployment and declining rural earnings are further exacerbating the economic crisis. PBF South Punjab Chief has urged the government to immediately delist cotton, yarn, and fabric from the current EFS policy. He further stated that maintaining GST on local cotton while exempting imports under EFS is effectively a 'Pakistan-unfriendly policy'. It undermines local production, weakens the economy, and benefits only opportunistic importers. Without urgent reforms, the country risks facing a deepening economic crisis driven by misguided policy decisions. Copyright Business Recorder, 2025
Business Recorder
13 hours ago
- Business
- Business Recorder
PBF seeks 18pc GST exemption on yarn, fabric
KARACHI: The Pakistan Business Forum (PBF) has called on the federal government to exempt yarn and fabric from the 18% General Sales Tax (GST) in the coming Federal Budget 2025–26, warning that the failure to do so could push the country's textile industry toward total collapse. PBF Chairman South Punjab, Malik Talat Suhail emphasised that the Export Finance Scheme (EFS), introduced to phase out subsidies and promote exports, has instead proven detrimental to the textile sector. Under EFS, imported raw materials are exempted from both sales tax and customs duty, while local inputs continue to be taxed at 18%. Though this tax is technically refundable, in practice, only 60–70% of refunds are released. The refund process is plagued by delays, manual processing, and high costs—issues that disproportionately harm small and medium-sized enterprises (SMEs). This imbalance has led many exporters to favor imported inputs, causing serious damage to local suppliers. As a result, Pakistan's import of cotton, yarn, and greige fabric surged by $1.5 billion in FY 2025, climbing from $2.19 billion to $3.64 billion. In contrast, textile exports rose by only $1.4 billion, and net textile exports are projected to decline from $14.0 billion to $13.6 billion. Over 120 spinning mills and more than 800 ginning factories have shut down, while protests from loom workers in Faisalabad are growing. SMEs are particularly vulnerable, as they face multiple tax payments at every stage of production and have limited access to cheaper imported alternatives, unlike larger firms. The current situation has placed severe pressure on the country's foreign exchange reserves, especially as the number of commercial import licenses has tripled—from 800 to 2,400. Meanwhile, local cotton production has fallen to a historic low of just 5 million bales, with further declines anticipated. Due to a lack of government support and declining demand, many farmers are abandoning cotton cultivation in favor of more water-intensive crops, placing further stress on national water resources. The PBF also warned that the collapse of the cotton economy is stripping rural areas of $2–3 billion in income, with women cotton-pickers among the hardest hit. 'Pakistan is currently the only country imposing an 18% sales tax on cottonseed and cotton feed, driving farmer income below the cost of production and hitting the poorest segments of society the hardest.' Rising unemployment and declining rural earnings are further exacerbating the economic crisis. The Forum stressed that if current policies are not revised, Pakistan could lose $4–6 billion in potential foreign exchange earnings. Instead, the country continues to rely on expensive foreign loans to cover rising import costs, worsening the trade deficit, unemployment, and tax collection shortfalls. International partners have also taken notice. The United States has signaled that, unless Pakistan addresses its trade imbalance, it may impose a 29% tariff on all Pakistani exports. Though the US has offered to export up to 1.5 million bales of cotton and has invited a Pakistani trade delegation for discussions, the crumbling of local spinning capacity raises the critical question: who will consume the cotton if domestic mills shut down? The PBF South Punjab chief has urged the government to immediately delist cotton, yarn, and fabric from the current EFS policy. He further stated that maintaining GST on local cotton while exempting imports under the EFS is effectively a 'Pakistan-unfriendly policy'. It undermined local production, weakens the economy, and benefits only opportunistic importers. Without urgent reforms, the country risks facing a deepening economic crisis driven by misguided policy decisions. Copyright Business Recorder, 2025
Business Recorder
22-05-2025
- Business
- Business Recorder
‘EFS scheme a must for export-led growth, trade balance improvement'
KARACHI: President Karachi Chamber of Commerce & Industry (KCCI) Jawed Bilwani, while highlighting the crucial role played by the Export Finance Scheme (EFS) in sustaining Pakistan's exports said the EFS scheme is imperative to ensure continued export-led growth and trade balance improvement. He emphasised that the said scheme must continue in its original status and position prior to Federal Budget 2025-26 with reinstatement of local purchases under Section 880 (1)(b) of SRO 957(I)/2021 for acquisition of input goods (to allow local input goods liable to sales tax shall be supplied against zero-rated invoices) to ensure liquidity, competitiveness, and formalisation across the entire value chain as already recommended by the inter-ministerial committee headed by the federal minister for planning constituted by the prime minister. 'Despite contending with the highest regional costs of electricity, gas, water, and interest rates, Pakistan's exports have shown remarkable resilience, a feat largely attributable to the support provided by the EFS. Preserving and enhancing this scheme is essential for maintaining our export competitiveness,' he added. He highlighted the EFS was strategically developed through broad-based consultation with stakeholders to simplify and streamline export procedures, enabling a more progressive and accessible export environment. It consolidated all previous schemes under one umbrella, minimized documentation requirements, and facilitated ease of doing business through a fully automated system integrated with WeBOC and Pakistan Single Window (PSW). The scheme included real-time audits and end-to-end traceability to regulate compliance costs and ensure transparency. Bilwani added the EFS has played a crucial role in easing liquidity pressures for exporters, particularly in the value-added textile and apparel sector, where access to input goods is vital for sustaining production and delivery timelines. The import of specialized yarns and fabrics under EFS has been particularly instrumental in enabling exporters to meet international quality standards. 'Much of the quality yarn and fabric used by Pakistan's apparel exporters is not produced domestically, and the local alternatives, where available, are often of lower quality and higher cost,' Bilwani explained. 'The garments manufacturers using imported yarn are of superior quality, giving our exporters a competitive edge in global markets.' The value-added apparel sector, he noted, achieves up to 70 percent value addition on export goods and requires uninterrupted access to high-quality raw materials. 'Countries like Bangladesh and Vietnam are completely reliant on imported raw materials for their export-oriented textile sectors, and their success is proof of the effectiveness of such models when supported by robust facilitation mechanisms,' he added. President Bilwani warned, however, that policy changes announced in the last federal budget, particularly the removal of zero-rating for local supplies, have disrupted the balance between imported and local raw materials. 'Currently, while imported raw materials are tax-exempt, local inputs are subject to an 18% sales tax with delayed and costly refunds,' he said. 'This creates a structural imbalance, discouraging local sourcing and impacting domestic SMEs across the value chain.' In view of the IMF's reservations about restoring full zero-rating, Bilwani proposed a pragmatic middle path, such as adopting a negative list to restrict high-risk imports under EFS, while preserving the broader scheme's facilitative framework. To further strengthen EFS, Bilwani reiterated the proposal for real-time audits and digital monitoring to reduce processing delays, enhance transparency, and ensure the scheme's credibility. 'If implemented effectively, the EFS has the potential to become a strategic pillar in eliminating Pakistan's trade deficit and ensuring long-term export sustainability,' he concluded. Copyright Business Recorder, 2025
Express Tribune
22-05-2025
- Business
- Express Tribune
Businessmen demand EFS restoration in original form
Listen to article Karachi Chamber of Commerce and Industry (KCCI) President Jawed Bilwani, while highlighting the crucial role played by the Export Finance Scheme (EFS) in sustaining Pakistan's exports, emphasised that the scheme must continue in its original status and position, which was before the presentation of federal budget for fiscal year 2024-25. In a statement, he called for allowing local purchases under Section 880 (1)(b) of SRO 957(I)/2021 (local input goods liable to sales tax to be supplied against zero-rated invoices) to ensure liquidity, competitiveness and formalisation across the entire value chain, as recommended by the Inter-Ministerial Committee. "The EFS is critical to ensuring continued export-led growth and trade balance improvement," he said. "Despite facing the highest regional costs of electricity, gas, water and interest rates, Pakistan's exports have shown remarkable resilience, a feat largely attributable to the support provided by the EFS. Preserving and expanding this scheme is essential for maintaining export competitiveness." Bilwani highlighted that the EFS was strategically developed by consolidating all previous schemes under one umbrella, which minimised documentation requirements and facilitated ease of doing business through a fully automated system integrated with Web-based One Customs (WeBOC) and the Pakistan Single Window (PSW). "Much of the quality yarn and fabric used by Pakistan's apparel exporters is not produced domestically and the local alternatives, where available, are often of lower quality and higher cost," he pointed out. "The imported yarn used by garment manufacturers is of superior quality, giving exporters a competitive edge in global markets." The value-added apparel sector makes up to 70% value addition to export goods and requires uninterrupted access to high-quality raw material. "Countries like Bangladesh and Vietnam are completely reliant on imported raw material for their export-oriented textile sectors and their success is a proof of effectiveness of such models when supported by robust facilitation mechanisms," he said. Bilwani warned that policy changes announced in the last federal budget, particularly the removal of zero-rating for local supplies, disrupted the balance between imported and local raw material. "Currently, while the imported raw material is exempt from taxes, local inputs are subject to 18% sales tax with delayed and costly refunds," he said. "This creates a structural imbalance, discouraging local sourcing and impacting SMEs across the value chain." In view of the IMF's reservations about fully restoring the zero-rating facility, he proposed a pragmatic middle path such as adopting a negative list to restrict high-risk imports under the EFS while preserving the broader scheme's facilitative framework.
Business Recorder
19-05-2025
- Business
- Business Recorder
MoC prepares draft textile, apparel policy
ISLAMABAD: The Ministry of Commerce (MoC) has prepared draft of three scenarios-based five years (2025-30) Textile and Apparel Policy aimed at achieving exports target of up to $ 29.381 billion aligned with export targets proposed by National Export Development Board (NEDB) envisaged under Uraan Pakistan and promoting 'Made in Pakistan'. Under the draft five years Textile and Apparel Policy, the proposed export target for FY 2025-26 will be $19.370 billion, for FY 2026-27 $ 21.420 billion, FY 2027-28 $ 23.740 billion, FY 2028-29 $ 26.710 billion and for FY 2029-30 $ 29.381 billion. Strategic objectives of the Policy which also include made-ups/ home textiles, intermediates and raw materials is to provide conducive business environment and boost textiles and apparel exports to $29.381 billion by FY 2029-30; enhance exports of value-added textile products, while maximising utilisation of locally produced raw materials and intermediates, attract export-led investment with the focus on high-value, high-tech and environmentally friendly projects, and enhancing productivity and economies of scale; promote sustainable manufacturing practices, focusing on resource efficiency, industrial de-carbonization, circular economy and social responsibility, and improve the quality of human resource, with a focus on training and capacity building. Jul-Mar textile group exports up 9.38pc to $13.613bn YoY The proposed strategic interventions are as follows: (a) SBP and EXIM Bank, in coordination with the MoC and the Ministry of Industries and Production (MoI&P), shall (i) redesign Export Finance Scheme (EFS) for better targeting and utilisation while allowing back-to-back Letter of Credits (LCs) against master LCs with mandatory value-addition to promote export diversification, (ii) enhance credit limits with priority to value-added sectors and MSME, and (iii) reduce mark-up; (b) EXIM Bank, in coordination with the SBP, shall announce targeted financing schemes at low mark-up, with priority to MSME for investments in (i) value-added products (like apparel, technical textiles, smart, high performance and human-made materials, etc.) for enhancing economies of scales, (ii) ancillary industry such as machinery, spare parts, dyes and chemicals, accessories/ trims, etc., and (iii) intelligent, green and technological transformations; (c) EXIM Bank, in coordination with the SBP, shall scale-up Credit Risk Insurance Scheme on favourable terms and conditions for exporters to cover 'Commercial Risks' (i) in case if buyer goes bankrupt or insolvent, defaults on payment, or refuses to take delivery of goods, or (ii) if the issuing bank goes bankrupt, closes down or in respect to receivership, or defaults in spite of consistency of trading documents and consistency between LCs and trading documents or dishonours under usance LC, or on account of 'Political Risks', (iii) if the country or region of the buyer or issuing bank prohibits or restricts the buyer or issuing bank from paying for goods or making LCs payment to the insured, (iv) an import ban is imposed on the goods purchased by the buyer or the import permit issued to the buyer is revoked, (v) any war, civil war or riot makes the buyer unable to perform contract or the issuing bank is unable to discharge its payment obligation under LC, or (vi) a moratorium is issued by third country through which the payment by the buyer or issuing bank has to be routed; (d) SBP and the EXIM Bank shall re-launch Financing Scheme for Renewable Energy with a priority to the MSME to reduce carbon footprints and minimize import of fossil fuels; and (e) EXIM Bank, in coordination with the SBP, shall incentivize establishment of warehouses abroad for E-Commerce entrants. The SBP shall review the policy to increase the export realisation period (from 120 days to 180 days) and the procedures of imposition of penalties on delayed realization. The SBP shall revise the definition of MSME, and link it with dollar-rupee parity. Access to Reliable and Competitive Energy: Power Division shall (i) supply electricity to direct and indirect exporters on regionally competitive tariff, exclusive of cross subsidies, Transmission and Distribution (T&D) losses, and inefficiencies of other consumers, (ii) diversify energy mix with a balanced blend of renewables and the other conventional resources, modernise infrastructure to reduce transmission and distribution losses and the other inefficiencies to make grid electricity affordable and reliable, (iii) ensure uninterrupted power supply to export sectors, (iv) operationalize Competitive Trading Bilateral Contracts Market (CTBCM) with rational 'Use of System' charges (excluding cross subsidies and other costs (v) announce incremental electricity consumption package, and (vi) review limit of surplus unit exports to WAPDA under Solar Net-metering Policy. Copyright Business Recorder, 2025
