PHMA Welcomes Continuation of EFS and Seeks Restoration of Original Framework

KARACHI: The Pakistan Hosiery Manufacturers & Exporters Association (PHMA) has welcomed the government’s decision to continue the Export Facilitation Scheme (EFS), while calling for the restoration of its original framework under SRO 957(I)/2021 to ease financial pressure on textile exporters and strengthen Pakistan’s export competitiveness.

PHMA Central Chairman Syed Zia Alamdar Hussain described the government’s decision as a positive step towards supporting export-oriented industries and facilitating the business community. However, he stressed that restoring key provisions of the scheme, as they existed before changes introduced in the Federal Budget 2024–25, is essential to provide meaningful relief to manufacturers.

He said the recent decline in exports should also be assessed in the context of policy changes that have increased production costs and created cash flow difficulties for textile exporters. According to PHMA, the withdrawal of zero-rating on eligible local supplies under SRO 1281(I)/2024, dated August 20, 2024, and the subsequent exclusion of raw cotton, cotton yarn and grey fabric from EFS 2021 under SRO 1435(I)/2025, dated August 5, 2025, have placed additional pressure on the textile value chain.

Under the previous framework, eligible local supplies to authorised exporters were available on a zero-rated basis. This allowed manufacturers to procure essential raw materials without tying up working capital in sales tax payments. Following the withdrawal of this facility, exporters must pay 18% sales tax on taxable local purchases, increasing production costs and putting locally sourced inputs at a disadvantage compared with eligible imported materials under the export facilitation framework.

Sales Tax Payments Create Cash Flow Challenges

Hussain highlighted that cash flow has become one of the biggest challenges facing textile exporters. The production, processing and shipment of export goods can take approximately 180 days, while delays in sales tax refunds can keep exporters’ funds tied up for even longer.

As a result, manufacturers must finance substantial tax payments through their own resources or bank borrowing while continuing to meet expenses for wages, electricity, gas, raw materials, freight and other operational needs.

He said the blockage of working capital raises borrowing costs, restricts production capacity and makes it harder for exporters to fulfil international orders at competitive prices. Small and medium-sized enterprises face particular difficulties because they have fewer financial resources to absorb prolonged refund delays and additional tax burdens.

The PHMA chairman stressed that sustainable export growth requires timely access to working capital and a predictable, business-friendly tax and facilitation regime.

PHMA Calls for Restoration of Key EFS Provisions

The association has urged the government to restore zero-rating on eligible local supplies to authorised exporters under EFS 2021, subject to appropriate verification and audit controls. It has also called for the reinstatement of raw cotton, cotton yarn and grey fabric within the scheme, particularly when domestic suppliers cannot meet requirements for quality, quantity, delivery schedules or competitive prices.

Hussain said timely sales tax refunds and consistent export policies would help reduce production costs, strengthen domestic manufacturing and provide Pakistani exporters with a level playing field in international markets.

He also reaffirmed PHMA’s support for government efforts to prevent misuse of the Export Facilitation Scheme and protect the national exchequer. He emphasized that suspected violations should be investigated by the relevant authorities and addressed in accordance with the law and due process.

According to the PHMA chairman, targeted enforcement and effective monitoring would be more appropriate than blanket restrictions that could negatively affect genuine and compliant businesses. He called for constructive consultation between the government and industry stakeholders to improve transparency, accountability and compliance without undermining the scheme’s benefits for legitimate exporters.

Industry-Government Cooperation Key to Export Growth

Concluding his statement, Hussain said the continuation of EFS was welcome, but meaningful relief would require the restoration of essential facilitation measures that allow exporters to operate efficiently.

He expressed confidence that stronger cooperation between the government and representative value-added export associations could help resolve industry concerns, restore business confidence, support employment, increase domestic value addition and put Pakistan’s exports on a more sustainable growth path.

The PHMA Central Office in Karachi issued the statement, urging the government to balance effective oversight with policies that enable compliant exporters to remain competitive and expand their contribution to the national economy.