IMF Orders Pakistan to End Local Sales by Export Factories

Pakistan will prohibit Export Processing Zones (EPZs) from selling products in the local market starting September 2026 under commitments made to the International Monetary Fund (IMF), according to Finance Ministry documents seen by ProPakistani.

Companies operating in EPZs will be required to export 100 percent of their production, ending the existing concession that allowed up to 20 percent of output to be sold domestically.

According to the Finance Ministry, Pakistan requested the IMF to retain the 20 percent local sales facility, but the Fund rejected the proposal. The government also sought permission to establish additional Export Processing Zones, which the IMF also declined.

The government now plans to raise the issue again during the next IMF economic review in an effort to restore the local sales concession for EPZ manufacturers.

The Finance Ministry said a proposal to formally abolish the exemption allowing local sales has been sent to the Federal Board of Revenue (FBR) for implementation.

The documents also note that a foreign consultant concluded Export Processing Zones were not distorting the domestic market and did not recommend withdrawing tax incentives available to either Export Processing Zones or Special Economic Zones. However, despite the consultant’s assessment, the IMF maintained its position on ending domestic sales by EPZ manufacturers.