Pakistan is set to prohibit companies operating in Export Processing Zones (EPZs) from selling their products in the local market starting September 2026, in line with commitments made under the country’s agreement with the International Monetary Fund (IMF).
According to Finance Ministry documents, EPZ-based manufacturers will be required to export 100 percent of their production, ending the existing policy that allowed them to sell up to 20 percent of their output within Pakistan. The move is aimed at aligning the country’s export policies with the structural reforms agreed upon with the IMF.
The Finance Ministry reportedly requested the IMF to retain the current 20 percent local sales concession, arguing that it benefits manufacturers and supports industrial activity. However, the IMF did not approve the request. Pakistan also sought permission to establish additional Export Processing Zones, but that proposal was also declined.
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Officials have stated that the government plans to raise the issue again during the next IMF economic review in an effort to restore the domestic sales facility for EPZ manufacturers. Meanwhile, a proposal to formally abolish the exemption has been forwarded to the Federal Board of Revenue (FBR) for implementation.
Interestingly, a foreign consultant hired to evaluate Pakistan’s export zones reportedly concluded that EPZs do not distort the domestic market and recommended that existing tax incentives for both Export Processing Zones and Special Economic Zones remain in place. Despite this assessment, the IMF maintained its position that EPZ manufacturers should focus exclusively on exports.
The proposed policy is expected to significantly impact businesses operating in Export Processing Zones, while the government continues discussions with the IMF on possible adjustments during future economic reviews.
