Islamabad is backing duty-free access to export inputs while signalling stronger controls, rejecting calls to weaken a scheme it considers essential to manufacturing competitiveness.
Pakistan will retain the Export Facilitation Scheme despite documented misuse, Minister of State for Finance and Revenue Bilal Azhar Kayani told the National Assembly on October 20, saying the government intends to protect domestic manufacturers without denying exporters competitively priced imported inputs.
The EFS allows authorised exporters to import or procure inputs used in export production without paying duties and taxes at the import stage. Introduced in 2021, it covers manufacturers-cum-exporters, commercial exporters, indirect exporters, vendors and international toll manufacturers.
Government backs access to inputs
Kayani said previous abuse justified corrective action but not abolition of the scheme or further reductions in eligible products. The government is consulting APTMA, power-loom operators, garment manufacturers and other exporters on controls intended to prevent diversion into the domestic market.
Earlier in 2026, the government extended the EFS utilisation period from nine to 18 months, with possible six-month extensions on a case-by-case basis, while introducing six-monthly reconciliation to strengthen oversight.
Upstream mills want tighter restrictions
APTMA argues that misuse remains concentrated in man-made yarn and fabrics. According to association data, EFS imports of man-made yarn increased from 3,056 tonnes to 12,773 tonnes, while fabric imports rose from 660 tonnes to 8,628 tonnes between FY2024-Q1 and FY2027-Q1.
APTMA has consequently sought exclusion of yarns and fabrics under Chapters 52 and 55. Cotton-yarn imports fell 42% to 21,587 tonnes after cotton yarn was removed from EFS eligibility, which the association cites as evidence that restrictions can protect domestic capacity.
The competitiveness balance
The government now faces a difficult optimisation problem: garment exporters need world-priced raw materials and sourcing flexibility, while domestic spinners and weavers need protection against tax-free imports leaking into the local market.
The better solution is therefore stronger digital traceability, input-output reconciliation, customs risk analytics and proof of export consumption, rather than blanket restrictions.
For Pakistan’s textile chain, the objective should be simple: allow duty-free inputs when they genuinely create exports, while ensuring the scheme cannot undercut compliant domestic producers.
