Long-awaited relief: Govt to scrap Export Development Surcharge

ISLAMABAD: In a major development, the government has decided to withdraw the 0.25 percent Export Development Surcharge (EDS) on exports with immediate effect, providing long-awaited relief to exporters and improving Pakistan’s competitiveness in global markets, sources in Commerce Ministry told Business Recorder.

The decision was taken at ameeting presided over by Prime Minister Shehbaz Sharif which was also attended by the experts.

The Prime Minister had earlier constituted a dedicated Working Group on EDS, chaired by Musadaq Zulqarnain, to reassess the Export Development Fund (EDF) and propose reforms.

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The group included private-sector members along with Secretary Commerce Bilal Azhar Kiyani, EDF Executive Director Mosharraf Zaidi, Shahzad Saleem, Misbah Naqvi, Khurram Mukhtar, Arif Saeed, Ahmad Umair and Sualeh Faruqi.

The Export Development Surcharge was a 0.25% surcharge on export value, collected when export proceeds were realized and funneled into the Export Development Fund. The fund is a government-backed pool of money, financed by the export development surcharge, which supports export-promotion projects — like training institutes, trade missions, research, marketing, and infrastructure — to boost Pakistan’s export capacity

The working group was mandated to review the effectiveness of ongoing EDF-funded initiatives and recommend measures to strengthen Pakistan’s export competitiveness. After extensive deliberations and evaluation, the Group finalized and submitted its recommendations to the Prime Minister last week.

During a high-level meeting held on Monday, it was decided that the 0.25 percent EDS on exports will be withdrawn immediately — an important step aimed at easing the financial burden on exporters and boosting their global competitiveness.

The Prime Minister also directed the formation of an interim Steering Committee, led by private-sector representatives, to oversee the utilization of the Rs 52 billion currently available in the EDF.

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He issued clear instructions that EDF resources must be dedicated exclusively to research and development, skill development, and export competitiveness initiatives, with no allocations for infrastructure projects.

The meeting also discussed the disproportionately high tax burden on export-oriented industries. It was acknowledged that exporters are taxed significantly more than businesses serving the domestic market.

A separate Working Group, led by Shahzad Saleem, has already completed its review of this issue and submitted its recommendations. The Prime Minister is expected to convene a dedicated meeting on the matter soon.

Sources said the EDS is being collected under existing law, which will now be revised after consultations with stakeholders. A mechanism will also be developed to finance the operational needs of the Trade Development Authority of Pakistan (TDAP) and other trade-related bodies following the removal of EDS.

Exporters argued that EDS was originally imposed at a time when the government was offering several incentives to support exports — a situation that no longer exists due to IMF-mandated policy changes. “There is no global precedent where exporters contribute to export development. Relief in EDS is justified,” exporters were quoted as telling the meeting.

Sources said the Prime Minister chaired a highly productive session, attended by domestic and international experts. Some participants suggested that the EDF should be discontinued altogether, but only after a proper analysis of how its resources can be better utilized.

“Exporters are working on extremely thin margins due to heavy taxation and high energy prices. They urgently need relief,” one participant noted.

While exporters demanded permanent relief, the Working Group recommended suspension of the EDS. However, according to sources, the Prime Minister made it clear that the government cannot offer sweeping relief measures at this stage, but added that exporters certainly deserve the immediate withdrawal of EDS.

The Prime Minister directed that a third-party audit of the Export Development Fund (EDF) be conducted. The audit will cover the past five years and will adhere to international standards, with a view to identifying inefficiencies or misuse of funds.

Sharif called for the selection of a private sector professional to chair the EDF, a move intended to bring more industry expertise and efficiency to the management of export development initiatives.

The meeting was attended by Federal Minister for Planning and Development, Ahsan Iqbal, Federal Minister for Finance, Muhammad Aurangzeb, Federal Minister for Commerce, Jam Kamal, Federal Minister for Climate Change, Musaddiq Malik, Federal Minister for Petroleum, Ali Pervez Malik, Minister of State for Finance, Azhar Bilal Kiani, Chairman SIFC and other relevant government officials.

Copyright Business Recorder, 2025