Pakistan's textile sector requires urgent policy reforms

The textile sector in Pakistan is facing significant challenges due to government policies that are seen as contradictory. Recent discussions highlighted issues with the Export Facilitation Scheme, delayed tax refunds, and rising energy costs, threatening the industry's stability. The removal of zero-rating on local raw materials has led to an 18 percent sales tax, while imported inputs remain exempt. This has caused a backlog of Rs329.5 billion in tax refunds, crippling local manufacturers and resulting in the shutdown of many spinning mills. High energy costs, nearly double those in other countries, further weaken the sector's competitiveness. The All Pakistan Textile Mills Association has called for reforms, including a graduated sales tax regime, to support local manufacturing and address these ongoing issues.