The Karachi Chamber of Commerce and Industry (KCCI) has strongly advocated for the continuation of the Export Finance Scheme (EFS) in its original form, emphasizing its central role in sustaining Pakistan’s exports and improving the trade balance.
In a statement, KCCI President Jawed Bilwani stressed that policy changes introduced in the federal budget for FY 2024-25 threaten to undermine the effectiveness of the EFS, particularly the removal of zero-rating on local supplies.
🧾 EFS: A Pillar of Export-Led Growth
Bilwani highlighted that despite regional disadvantages—including the highest costs of electricity, gas, water, and interest rates—Pakistan’s exporters have maintained resilience, thanks in large part to supportive schemes like the EFS.
“Preserving and expanding this scheme is essential for maintaining export competitiveness,” he noted.
⚙️ EFS Simplifies and Streamlines Export Financing
The EFS, developed by consolidating multiple previous schemes, reduces red tape by operating through fully automated systems like WeBOC and Pakistan Single Window (PSW). This integration has improved ease of doing business, especially for SMEs and value-added sectors.
📦 Challenges in Sourcing Quality Raw Material
A key issue highlighted by Bilwani is the dependence on imported yarn and fabric, particularly for the apparel sector, which contributes up to 70% value addition in export goods.
“Most high-quality yarn is not produced locally. Where it is, it’s costlier and lower in quality,” he said.
This makes uninterrupted access to imported raw material vital for competitiveness. He referenced Bangladesh and Vietnam, which rely heavily on imported inputs yet thrive due to effective facilitation mechanisms.
⚠️ Budget Changes Disrupt the Input Balance
The 2024-25 budget removed zero-rating on local inputs, meaning local suppliers must now charge 18% sales tax, while imported raw materials remain exempt. This creates a structural imbalance, discouraging local sourcing and placing additional burdens on SMEs.
The Section 880(1)(b) of SRO 957(I)/2021—which allows zero-rated invoicing for local inputs—should be reinstated to support liquidity and competitiveness.
💡 A Middle Path: Restricting High-Risk Imports
Understanding the IMF’s concerns about restoring full zero-rating, Bilwani proposed a pragmatic alternative: adopting a negative list approach that restricts only high-risk imports while preserving the wider facilitative structure of the EFS.
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