The trade policy of Pakistan has been liberalised and the foreign exchange control system has been dismantled. Most of the products have been removed from the negative and restricted lists and various facilities have been provided to the exporters including a better system of duty drawbacks, bonded warehousing, establishment of export processing zones and introduction of export processing unit schemes.

The Export Promotion Bureau has been established on a new pattern to help the exporters in an effective way. Resident and non-resident Pakistanis have been allowed to hold foreign exchange in the external accounts. Foreign Currency Bearer Certificates have been introduced. These certificates carry a rate of interest one quarter per cent higher than LIBOR.

The government has largely de-regulated, de-controlled and simplified the import procedures. Now import of all free importable items (only 80 categories are banned for import of religious, national security, health, and safety considerations) have been allowed, without going through any bureaucratic procedure. Moreover it is allowed to open Letters of Credits, with authorised foreign exchange dealers/banks without prior government approval.

Promotion of Exports

With a view to encouraging exports, Pakistan provides duty-free status to the exporters, export financing and rebates in income tax on export earnings. Duty-free status is ensured to the exporters through four schemes, viz., Standardized Rebates, Bonded Warehousing, Export Processing Zones, and Export Processing Units. In order to ensure adequate supply of credit to small and medium exporters, a scheme of Export Credit Guarantee has been introduced. The capital base of the scheme has been increased from Rs. 60 million to Rs. 130 million which will be sufficient to extend insurance cover to loans amounting to Rs. 2.6 billion. The scheme will function on the basis of one window operation and the exporters will be provided both the insurance cover and loan at the designated bank branches.

Export Financing

Pakistan provides credit to exporters at 6 per cent for a period of 180 days. The concessionary export financing is extended to almost all the exports. However, the period of concessionary export financing for export of engineering goods has been fixed at 365 days.