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ISLAMABAD: Electricity consumers across Pakistan may face higher power bills from next month as electricity distribution companies have approached the National Electric Power Regulatory Authority (NEPRA) seeking a quarterly tariff adjustment. According to sources, the proposed adjustment could result in an increase of around Rs1 per unit in electricity prices during the upcoming quarter. The distribution companies have submitted their adjustment request to NEPRA, which will examine the figures and determine the impact on consumers under the applicable quarterly tariff mechanism. Sources said the expected increase is linked to the expiry of the existing quarterly adjustment relief. Under the current arrangement, consumers are receiving a relief of Rs1.99 per unit, which is scheduled to expire at the end of the current month. With the relief ending, electricity tariffs are expected to rise for consumers across the country from next month, subject to NEPRA’s approval of the proposed adjustment. The quarterly tariff adjustment mechanism is used to pass on changes in electricity generation costs and other relevant expenses to consumers. Depending on the regulator’s assessment, the resulting adjustment can either increase or reduce electricity bills. The proposed increase is likely to add to the financial burden on households and businesses already facing elevated electricity costs. Consumers are now awaiting NEPRA’s decision, which will determine the final impact on electricity tariffs in the upcoming quarter. NEPRA is expected to review the distribution companies’ submissions before announcing its decision. The final adjustment may differ from the amount initially sought by the power distribution companies following the regulator’s scrutiny of the data and applicable costs.

ISLAMABAD: Pakistan’s trade deficit expanded sharply during the first month of the new fiscal year, reaching nearly $4 billion in July, as a strong rise in imports continued to outpace export growth, highlighting persistent weaknesses in the country’s external sector despite a series of incentives announced for exporters. According to the latest figures released by the Pakistan Bureau of Statistics (PBS), the country’s trade deficit widened to $3.95 billion in July 2026, compared to $3.16 billion recorded during the same month last year. The deficit increased by approximately $794 million, representing an annual rise of 25.2%. The widening gap was primarily driven by a substantial increase in imports, which climbed to $6.9 billion from $5.8 billion in July 2025. This reflects an increase of more than $1 billion, or 18% year-on-year, indicating stronger demand for imported goods and raw materials. Exports Show Growth but Remain Below Key Milestone While Pakistan’s exports registered positive growth, they once again failed to cross the important $3 billion monthly mark. Exports reached $2.94 billion, falling short of the milestone by around $61 million. On an annual basis, exports increased by 9.5%, adding nearly $256 million compared to July last year. Although the improvement reflects steady recovery in overseas shipments, analysts believe the pace remains insufficient to counter the rapid expansion in imports. Exports had crossed the $3 billion threshold in January 2026, touching approximately $3.05 billion, but the country has been unable to maintain that level in the months that followed. Tariff Reforms Under Scrutiny The latest trade figures have renewed debate over Pakistan’s tariff liberalisation policy, introduced under broader economic reforms supported by international financial institutions, including the World Bank and the International Monetary Fund (IMF). The government has gradually lowered tariff barriers to increase competition and integrate Pakistan more closely into global markets. However, economists argue that the economy was opened before domestic industries were provided with sufficient support to compete effectively. Business leaders have repeatedly pointed out that exporters continue to face high energy prices, elevated financing costs, tax-related uncertainties and exchange rate volatility, all of which reduce their competitiveness in international markets. Earlier projections by the World Bank had suggested that tariff reforms would increase exports by 14% while limiting import growth to around 7%. However, the latest figures suggest imports have grown much faster than anticipated, while export gains have remained comparatively modest. Government Rolls Out Fresh Export Incentives To strengthen export performance, the federal government has announced a series of financial support measures during the current fiscal year. In the federal budget, Prime Minister Shehbaz Sharif reduced the minimum and advance tax on exporters to 1.25% and abolished the 10% super tax on export earnings in an effort to improve liquidity and encourage investment in export-oriented industries. More recently, the government approved a Rs98 billion export support package aimed at improving competitiveness and increasing foreign exchange earnings. Under the revised Export Finance Scheme (E-EFS), exporters will be able to obtain six-month working capital loans at an interest rate of 8.5%, with the government absorbing 5 percentage points of the financing cost. The subsidy for this component alone is estimated at Rs58 billion during the current fiscal year. ECC Approves New Financing Facilities The Economic Coordination Committee (ECC) has also expanded access to concessional financing by increasing the ceiling of the existing short-term financing portfolio from Rs1 trillion to Rs1.5 trillion. In addition, the committee approved the launch of a new Long-Term Growth Financing Facility, allowing exporters to access loans at an interest rate of 2% for the first two years, followed by a fixed 5% rate for the subsequent eight years. The government has also introduced a performance-based rebate scheme, effective from July 1, 2026, with an estimated annual allocation of Rs15 billion. Under the programme, exporters recording annual export growth of up to 10% over the previous year will receive a rebate equal to 1% of the incremental export value, while exporters achieving growth exceeding 10% will qualify for a 2% rebate on additional exports. Long-Term Challenges Persist Despite successive incentive packages introduced over several decades, Pakistan continues to struggle with achieving sustained export-led growth. Industry observers note that no single Pakistani exporter has generated $1 billion in annual export earnings, underscoring the structural challenges facing the country’s export sector. These challenges include limited product diversification, low industrial productivity, rising production costs, inconsistent policy implementation and insufficient value addition. Monthly Performance Offers Some Relief On a month-on-month basis, the trade data presented a more encouraging picture. Exports increased by 31% in July compared to June, rising by approximately $697 million, while imports remained largely unchanged at around $6.9 billion. As a result, the monthly trade deficit narrowed by nearly 15%, or around $709 million, compared with the previous month.

KARACHI: A proposed move to withdraw the permission allowing factories operating in Pakistan’s Export Processing Zones (EPZs) to sell up to 20% of their output in the domestic market has triggered concerns among exporters, investors and international textile-recycling organisations, who fear the policy could disrupt investment, employment and a wider global circular-economy supply chain. The controversy has emerged after Pakistan committed to the International Monetary Fund (IMF) that it would amend the existing rules governing EPZs and prohibit sales from these zones into the domestic tariff area. According to the IMF’s latest programme review, Pakistan has committed to introduce amendments aimed at ending domestic sales by EPZ-based manufacturers. The report states that the amendments were to be placed before the federal cabinet for approval by September 2026. However, exporters and industry representatives have challenged the move, arguing that the existing 80:20 arrangement was part of the investment and regulatory framework under which many businesses established operations in the zones. Under the existing system, EPZ manufacturers can export 80% of their production while selling up to 20% in Pakistan after payment of applicable duties and taxes. Industry stakeholders say the domestic-sale provision is particularly important for products that have limited commercial demand in overseas markets. The proposed abolition has also attracted attention in the United States because American companies supply raw materials and used textiles to Pakistani businesses operating in the EPZs. The US-based Secondary Materials and Recycled Textiles Association (SMART) has approached IMF Mission Chief to Pakistan Iva Petrova, warning that eliminating the domestic-sales provision could have consequences extending beyond Pakistan’s industrial sector. The association has argued that Pakistan occupies an important position in the global textile circular economy, particularly in the sorting, grading, reuse and recycling of used textiles collected in North America and Europe. According to SMART, used clothing and textile materials collected in the United States, Canada and European countries are sent to Pakistan, where they are sorted and graded before being channelled into reuse, recycling, manufacturing and affordable consumer markets. The association has warned that ending the 80:20 mechanism could reduce demand for recovered textiles and place downward pressure on their prices. Such a development, it said, could weaken textile-collection programmes in North America and reduce the income generated by charitable organisations from donated clothing. Organisations including Goodwill, the Salvation Army and St Vincent de Paul depend partly on revenues generated from donated goods to finance a range of social programmes, including workforce training, employment assistance, food support, recovery services, youth programmes and housing assistance. SMART has therefore cautioned that a major disruption in Pakistan’s used-textile market could have financial consequences for charitable organisations in North America, with potential losses running into tens of millions of dollars. The association also warned that reduced demand for used textiles could ultimately result in a greater volume of reusable material being sent to landfills or incinerators rather than being recycled or reused. US exporters raise objections US exporters have also expressed concern over the proposed withdrawal of the 20% domestic-sale allowance. Their concerns are significant because American suppliers form part of the upstream supply chain that feeds Pakistani recycling and manufacturing units located in EPZs. Abid Iqbal, representing Nashmia Industries, said during Express News programme The Review that US exporters had communicated their concerns to Pakistani counterparts. According to Iqbal, US exporters had also been told informally that the IMF itself had not initiated the proposal to remove the 20% quota. The development has consequently raised questions within the industry about how the condition was incorporated into Pakistan’s commitments under the IMF programme and whether sufficient consultation took place with affected stakeholders. Industry representatives have also warned of possible legal and contractual disputes, maintaining that the 20% domestic-sales provision was part of the regulatory and investment framework under which businesses made their investment decisions. They argue that companies entered the zones with an understanding that they would be able to export the bulk of their production while disposing of a limited portion in the domestic market after meeting applicable tax and customs obligations. EPZ rules and proposed amendment The Export Processing Zones Authority (EPZA) operates under the legal framework established through the EPZ Act of 1980. The law enables the establishment of export processing zones with approval from the federal government. Under Rule 228(5) of the Customs Rules, EPZ-based factories have historically been allowed to sell up to 20% of their production in the domestic tariff area, subject to applicable duties and taxes. A higher limit of 30% had been applicable to the Resalpur area. EPZA has reportedly forwarded a proposal to the Federal Board of Revenue (FBR) to eliminate the 20% quota from October 1 in line with the IMF-related commitment. The proposal, however, has exposed differences within the government over the scope and interpretation of the IMF condition. Proceedings of the Senate Standing Committee on Industries held last month indicate that the Ministry of Industries and Production maintained that abolition of the 20% domestic-sales quota was not included in the original IMF agreement. According to the ministry’s position, the initial IMF requirement was restricted to preventing the introduction of new fiscal incentives, including tax concessions and subsidies, rather than immediately eliminating the existing domestic-sales mechanism. The ministry has reportedly argued that the later addition of the quota-related condition requires further clarification. Assessment of EPZs The issue is also linked to an assessment of Special Economic Zones (SEZs) and EPZs that Pakistan was required to undertake under the IMF programme. The government engaged consultancy firm AT Kearney to assess the zones and determine whether their operations were creating distortions in the domestic market. According to records presented before the Senate Standing Committee on Industries, the assessment completed last year concluded that EPZs were not creating significant market distortions. The report, according to the parliamentary proceedings, did not recommend withdrawing existing fiscal incentives. The issue has therefore become a point of discussion between government officials and the IMF as authorities seek to reconcile the lender’s programme requirements with