Key Takeaways
- Export Processing Zones (EPZs) in Pakistan will be prohibited from selling products locally starting September 2026.
- The International Monetary Fund rejected Pakistan's request to retain a 20 percent local sales facility for EPZ manufacturers.
- The government plans to raise the issue again during the next IMF economic review.
Pakistan is set to implement new regulations that will prohibit Export Processing Zones (EPZs) from selling their products in the domestic market starting September 2026, according to Finance Ministry documents. This decision comes as part of commitments made to the International Monetary Fund (IMF), which has rejected Pakistan's request to retain a concession allowing up to 20 percent of EPZ output for local sales.
The government initially sought permission from the IMF to maintain this local sales facility, but was unsuccessful in its bid. As a result, companies operating within these zones will be required to export 100 percent of their production, effectively ending an existing concession that allowed for domestic sales. The Finance Ministry has proposed formally abolishing the exemption allowing local sales and has submitted this proposal to the Federal Board of Revenue (FBR) for implementation.
Despite a recent assessment by a foreign consultant which concluded that Export Processing Zones were not distorting the domestic market, the IMF maintained its position on ending domestic sales by EPZ manufacturers. The government now plans to revisit this issue during the next IMF economic review in an effort to restore the local sales concession for EPZ manufacturers.
The move is part of a broader strategy aimed at aligning Pakistan's trade policies with international standards and ensuring greater export-oriented production. However, it also raises concerns about potential job losses and reduced revenue from domestic sales among EPZ companies. The government has acknowledged these challenges but maintains that the long-term benefits of increased exports will outweigh any short-term disruptions.
Finance Ministry officials stated in a document obtained by ProPakistani: 'We are committed to implementing the IMF's recommendations, which include ending local sales by EPZs and focusing on export-oriented production.' The government hopes that this change will enhance Pakistan’s competitiveness in global markets and improve its trade balance. However, critics argue that such measures could stifle domestic economic activities and limit consumer access to affordable goods.
The decision has significant implications for the thousands of workers employed by EPZs across the country. Many fear job losses as companies may struggle to adapt to the new regulations. Local businesses and consumers are also concerned about potential shortages and increased prices for certain products that were previously available through local sales channels.
In a statement, one industry expert commented: 'While we understand the need for export-oriented growth, this sudden ban on domestic sales could have severe repercussions for our workers and consumers. We urge the government to find a balanced approach that supports both exports and domestic markets.'
'We are committed to implementing the IMF's recommendations, which include ending local sales by EPZs and focusing on export-oriented production.'
Finance Ministry official, Government of Pakistan
'While we understand the need for export-oriented growth, this sudden ban on domestic sales could have severe repercussions for our workers and consumers. We urge the government to find a balanced approach that supports both exports and domestic markets.'
Industry expert, Local business representative
