Pakistan will prohibit factories operating in Export Processing Zones (EPZs) from selling their products in the local market beginning September 2026, as part of commitments made to the International Monetary Fund (IMF), according to Finance Ministry documents.
The move will require EPZ-based manufacturers to export 100% of their production, ending the long-standing concession that allowed up to 20% of output to be sold domestically.
According to the Finance Ministry, Pakistan requested the IMF to retain the existing 20% local sales facility for EPZ manufacturers.
However, the IMF rejected the proposal.
The government also sought approval to establish additional Export Processing Zones, but that request was also declined by the Fund.
The Finance Ministry said Pakistan plans to revisit the issue during the next IMF economic review, seeking to restore the local sales concession for EPZ companies.
Meanwhile, a proposal to formally abolish the exemption allowing domestic sales by EPZ manufacturers has been forwarded to the Federal Board of Revenue (FBR) for implementation.
The ministry’s documents also revealed that a foreign consultant commissioned to review the matter concluded that Export Processing Zones were not distorting Pakistan’s domestic market.
The consultant also did not recommend withdrawing tax incentives currently available to either Export Processing Zones (EPZs) or Special Economic Zones (SEZs).
Despite this assessment, the IMF maintained its position that EPZ manufacturers should focus exclusively on exports and cease domestic sales from September 2026.
The policy change is aimed at reinforcing the export-oriented purpose of EPZs under Pakistan’s ongoing economic reform commitments with the IMF.
