KARACHI: Five of Pakistan’s zero rating export sectors, including value added textile, sports goods, surgical equipment, leather, and carpet manufacturing, fear the government may bring them under the sales tax regime in the upcoming fiscal budget 2019-20 to be announced on Tuesday, June 11.
Warning against abolishing the Zero Rating of sales tax scheme, the sectors estimate the country’s exports would go down by more than 20 percent by imposition of sales tax, which in turn will “ruin the export oriented industries, cause flight of capital, mass unemployment and foreign exchange losses.”
Addressing a press conference and a protest demonstration at Karachi press club on Monday against the expected withdrawal of Zero Rating of sales tax scheme, the representatives of these five sectors called the move a “conspiracy against the increasing exports of the country” and sought Prime Minister Imran Khan’s intervention.
“The concerned high officials are not realizing the gravity of the situation and sensitivities of the matter. They are stubborn enough to implement the dictates of IMF (international Monetary Fund),” said Zubair Motiwala, Chairman of the Council of All Pakistan Textile Association.
“It is not the right time to take such risks. If you will eliminate the status, the country’s exports would suffer by 20 to 30 percent in the coming years,” he said.
Pakistan’s five sector that enjoy zero rating sales tax scheme claim to contribute around 70 percent of total exports of the country and generate 50 percent of the total employment.
Last month, Pakistan struck a $6 billion loan deal with the IMF after months of negotiations. The global lending body conditioned the bailout program with reduction in fiscal deficit to 0.6 percent of the Gross Domestic Product (GDP), withdrawal of subsidies, and incentives including eliminating the zero rating status to the export oriented industries.
“We have categorically refused to accept the government’s new tax regime to discontinue zero rating. No successive governments have kept their promises and cleared the backlog of exporters refund claims worth billion of rupees in shape of Sales Tax, Withholding Tax etc. We will not deviate from our principle demand to continue zero rating,” Motiwala said.
The exporters argued that zero rated status has increased the country’s exports by 29 percent in terms of rupee which shows the exports are on the growth trajectory.
Pakistan has also devalualued its national currency by over 40 percent since December 2017 mainly to encourage exports by making the local industry competitive.
“The full impact of the rupee devaluation will be seen in the coming months as the orders booked in advanced are maturing and new contracts are being made in next few months,” said Syed Shujat Ali, Chairman-South Zone for Pakistan Leather Garments Manufacturers and Exporters Association, said.
Representative of carpet manufacturing sector also feared that zero rating discontinuation will wipe out the carpet industry in the country. “We are already working under extremely tough conditions. Elimination of the status would be a disaster for the carpet industry,” said M. Naeem Sajid, Chairman of Pakistan Carpet Manufacturers & Exporters Association.
The industrialists lamented the lack of basic facilities including power, water and access to ports. “The government is not giving us gas, water and a clear passage to enter the seaport but they question why the exports are not increasing,” Muhammad Jawed Bilwani, Chief coordinator of Five Zero Rated sectors, said.
“A day of gas load shedding in industries means that 14 percent of your production has been compromised,” he said.
The sectors’ representatives said that the government wants to impose 7.5 percent sales tax on the zero rated sectors. “Collecting sales tax and then refunding it is a futile exercise, which creates hassles for exporters and also opens flood gates of corruption. No collection and no to refund the sales tax from five zero rated export sectors is a tried and tested formula for increasing revenue and exports,” Motiwala said.
Pakistani exporters warn of 20-30% hit if zero rating sales tax regime abolished
Pakistani exporters warn of 20-30% hit if zero rating sales tax regime abolished
- Pakistan has agreed under the $6 bn IMF loan program to abolish subsidies and incentives including zero rating status
- The five zero rated sectors claim to comprise 70% of the country’s exports and generate 50% of total employment
Pakistan reports current account surplus in Jan. owing to improved trade, remittances
- Pakistan’s exports crossed the $3 billion mark in Jan. as the country received $3.5 billion in remittances
- Last month, IMF urged Pakistan to accelerate pace of structural reforms to strengthen economic growth
ISLAMABAD: Pakistan recorded a current account surplus of more than $120 million in January, the country’s finance adviser said on Tuesday, attributing it to improved trade balance and remittance inflows.
Pakistan’s exports rebounded in January 2026 after five months of weak performance, rising 3.73 percent year on year and surging 34.96 percent month on month, according to data released by the country’s statistics bureau.
Exports crossed the $3 billion mark for the first time in January to reach $3.061 billion, compared to $2.27 billion in Dec. 2025. The country received $3.5 billion in foreign remittances in Jan. 2026.
Khurram Schehzad, an adviser to the finance minister, said Pakistan reported a current account surplus of $121 million in Jan., compared to a current account deficit of $393 million in the same month last year.
“Improved trade balance in January 2026, strong remittance inflows, and sustained momentum in services exports (IT/Tech) continue to reinforce the country’s external account position,” he said on X.
Pakistan has undergone a difficult period of stabilization, marked by inflation, currency depreciation and financing gaps, and international rating agencies have acknowledged improvements after Islamabad began implementing reforms such as privatizing loss-making, state-owned enterprises (SOEs) and ending subsidies as part of a $7 billion International Monetary Fund (IMF) loan program.
Late last month, the IMF urged Pakistan to accelerate the pace of these structural reforms to strengthen economic growth.
Responding to questions from Arab News at a virtual media roundtable on emerging markets’ resilience, IMF’s director of the Middle East and Central Asia Jihad Azour said Islamabad’s implementation of the IMF requirements had been “strong” despite devastating floods that killed more than 1,000 people and devastated farmland, forcing the government to revise its 4.2 percent growth target to 3.9 percent.
“What is important going forward in order to strengthen growth and to maintain the level of macroeconomic stability is to accelerate the structural reforms,” he said at the meeting.
Azour underlined Pakistan’s plans to privatize some of the SOEs and improve financial management of important public entities, particularly power companies, as an important way for the country to boost its capacity to cater to the economy for additional exports.
“This comes in addition to the effort that the authorities have made in order to reform their tariffs, which will allow the private sector of Pakistan to become more competitive,” the IMF official said.
