ECC Approves Rs255bn Package to Accelerate Pakistan’s Exports

ISLAMABAD: Pakistan’s Economic Coordination Committee has approved export-support measures worth more than Rs255 billion, introducing subsidised financing and performance incentives intended to strengthen the country’s sluggish export sector. The decisions were taken at a cabinet committee meeting chaired by Finance Minister Muhammad Aurangzeb and reported on Tuesday.

The package combines three separate initiatives designed to give exporters cheaper access to working capital, encourage investment in new production capacity and reward businesses that increase overseas sales. The government is seeking to reverse years of weak export growth, with annual receipts remaining near the $30 billion level while the country’s import requirements continue to place pressure on foreign exchange reserves.

Under the expanded Export Finance Scheme administered through the Export-Import Bank, eligible exporters will be offered six-month working-capital loans at an interest rate of 8.5 per cent. The federal government will absorb an additional five percentage points of financing cost, creating an estimated subsidy burden of Rs58 billion during the current fiscal year. The programme’s total portfolio has also been raised by 50 per cent, from Rs1 trillion to Rs1.5 trillion.

The finance ministry told the committee that exporters also required predictable, long-term funding for expansion and modernisation. In response, the ECC approved a new Long-Term Export Growth Financing Facility that will offer financing at two per cent for its first two years and a fixed five per cent rate for the following eight years. The arrangement is aimed at new export-oriented projects as well as the balancing, replacement and upgrading of existing industrial plants.

The long-term facility is expected to provide around Rs350 billion in financing and could involve subsidies of approximately Rs195 billion over its duration. For the 2026-27 fiscal year alone, the government has estimated a subsidy requirement of Rs25 billion. Officials argued that the previous long-term export financing framework had received a limited response because variable borrowing costs exposed businesses to interest-rate uncertainty.

A third measure will link government support directly to additional export performance. From July 1, companies recording annual export growth of up to 10 per cent over the previous year will qualify for a rebate equal to one per cent of the increase in export value. Exporters achieving growth above 10 per cent will become eligible for a two per cent rebate on their incremental sales, with the scheme expected to cost about Rs15 billion annually.

The committee also approved a reduced domestic gas tariff of Rs2,000 per million British thermal units for power plants normally dependent on imported liquefied natural gas. The rate, applicable to specified supplies during April, May and June, is substantially below the disrupted imported LNG cost of more than Rs3,500 per mmBtu. The measure was intended to limit pressure on electricity prices while protecting the revenue position of the Sui Northern Gas Pipelines network.

In another decision, the ECC authorised a supplementary grant of Rs4 billion to cover arbitration expenses connected with international proceedings involving independent power producers and major utility shareholders. The allocation highlights the continuing fiscal cost of disputes in Pakistan’s energy sector at a time when the government is simultaneously attempting to fund industrial incentives and control power tariffs.

The export package could improve liquidity for manufacturers, reduce borrowing uncertainty and encourage businesses to invest in higher production capacity. Its wider success, however, will depend on transparent implementation, timely disbursement, access for smaller exporters and measurable growth in foreign earnings. The government will now need to monitor whether the subsidies generate sustained export expansion sufficient to justify their substantial cost to the federal budget.