‘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