Abdul Ghani

Federal Board of Revenue (FBR) has allowed the submission of insurance guarantees as an alternative to bank guarantees under the Export Facilitation Scheme (EFS), according to a new statutory notification (SRO 1435(I)/2025) exclusively obtained by WealthPK.

The amendment allows exporters to submit insurance-backed guarantees from companies rated AA+++ by the Pakistan Credit Rating Agency, offering greater flexibility and reducing reliance on traditional bank guarantees that typically tie up substantial working capital.

FBR’s notification inserts the term “or insurance guarantee” across multiple provisions in the Customs Rules 2001, enabling exporters to fulfill security requirements via the insurance route until the bureau formally notifies the standard format for such guarantees.

An official at FBR’s Export Policy Wing, while speaking to WealthPK said, “This policy shift is part of the government's broader trade facilitation agenda to ease cash flow constraints faced by exporters. Insurance guarantees will reduce reliance on expensive bank collateral, especially for SMEs engaged in export-oriented industries.”

Exporters under EFS may now submit either bank guarantees or insurance guarantees. Provisionally, exporters will continue to submit bank guarantees until the insurance guarantee format is formally issued.

Moreover, relaxation in raw material procurement under EFS allows EFS users to acquire new raw materials up to 10% of authorisation without prior approvals. EFS coverage excludes raw cotton, cotton yarn, and grey cloth, which had been brought under stricter documentation.

Exporters have lauded the move, calling it a long-awaited step towards reducing procedural bottlenecks and freeing up working capital. “For mid-sized exporters, bank guarantees are a liquidity trap. Insurance guarantees will create a more business-friendly ecosystem,” said a representative of the Pakistan Readymade Garments Manufacturers & Exporters Association.

Analysts view this reform as a confidence-building measure for export sectors under IMF-backed economic reforms, providing operational ease without compromising revenue safeguards.

Credit: INP-WealthPk