Islamabad: Pakistan’s pharmaceutical industry has urged the federal government to introduce a package of fiscal, regulatory and foreign exchange incentives, including allowing exporters to retain a larger share of their earnings in foreign currency, as it seeks to increase pharmaceutical exports from around $457 million to $2 billion and transform the sector into a major source of foreign exchange earnings.
The demands were raised during a series of meetings held in Islamabad between representatives of the pharmaceutical industry and senior government officials, including Commerce Secretary Sualeh Ahmed Faruqi, Special Investment Facilitation Council (SIFC) Secretary Jahanzaib Khan and Drug Regulatory Authority of Pakistan (DRAP) Chief Executive Officer Dr Obaidullah Malik.
The discussions focused on challenges facing the pharmaceutical sector, export promotion, investment incentives and measures to improve the industry’s international competitiveness.
Industry representatives including PPMA Chairman Muhammad Tahir Azam as well as former Chairman Tauqeer-ul-Haq, Usman Khalid Waheed, Ayesha Tammy Haq and others said Pakistan’s pharmaceutical sector had demonstrated strong export growth despite facing regulatory and financial constraints. Pharmaceutical exports increased by around 34 percent during the fiscal year ended June 2025, reaching approximately $457 million, the highest annual growth recorded by the sector in nearly two decades.
The Pakistan Pharmaceutical Manufacturers Association (PPMA) told government officials that with supportive policies and export-oriented reforms, pharmaceutical exports could rise to $2 billion within the next few years, helping diversify Pakistan’s export base and reduce pressure on the country’s external account.
A major demand put forward by the industry is an increase in the foreign currency retention limit for pharmaceutical exporters from the current 15 percent to 35 percent. Under existing regulations, pharmaceutical companies are allowed to retain only 15 percent of their export proceeds in foreign currency for activities such as product registration, regulatory approvals, marketing and promotional campaigns abroad, while the remaining 85 percent must be converted into Pakistani rupees.
The PPMA has proposed an amendment to the State Bank of Pakistan’s Foreign Exchange Manual to increase the retention limit, arguing that pharmaceutical exports differ significantly from traditional export sectors because companies must spend substantial amounts in foreign markets before they can generate meaningful sales.
Industry representatives maintained that obtaining regulatory approvals, registering medicines, participating in international exhibitions, building brands and maintaining marketing networks in overseas markets require significant expenditures in foreign currencies. They argued that the current retention limit is insufficient to support aggressive export expansion and restricts the ability of Pakistani companies to compete effectively in international markets.
The industry believes that allowing exporters to retain 35 percent of their earnings would strengthen their capacity to invest in foreign markets, accelerate product registrations and expand their footprint across Asia, Africa, the Middle East and other emerging markets.
Another major proposal relates to restoration of a 10 percent tax credit on investments made for balancing, modernization and replacement (BMR), expansion and upgrading of plant and machinery. The pharmaceutical industry argues that restoring the incentive would encourage manufacturers to invest in modern technologies, improve production efficiency and upgrade facilities to meet increasingly stringent international quality standards.
According to industry representatives, continuous investment in modern manufacturing infrastructure is essential for expanding exports because foreign regulators and international buyers increasingly demand compliance with advanced quality, safety and manufacturing standards.
The PPMA has also urged the government to restore pharmaceutical exports under the Final Tax Regime (FTR), under which tax deducted on export proceeds through banking channels is treated as the final discharge of tax liability.
Industry leaders contend that the removal of exports from the FTR framework has increased compliance requirements, created liquidity pressures and reduced competitiveness without generating significant additional revenue for the government. They argue that restoration of the regime would improve cash flows for exporters and encourage further expansion of overseas sales.
The pharmaceutical manufacturers have further sought exemption from withholding tax on payments made to foreign entities for overseas drug registration, regulatory approvals, marketing and promotional activities. According to the industry, such expenditures are essential for export development and should not be subjected to additional taxation when the recipient entities have no taxable presence in Pakistan.
The PPMA also informed government officials that, in line with the National Tariff Policy 2025-2030 and following consultations with the National Tariff Commission, it had voluntarily withdrawn earlier proposals seeking reductions in customs duties on certain locally manufactured raw materials, expressing support for the government’s broader tariff reform agenda.
Industry representatives said the pharmaceutical sector has the potential to become one of Pakistan’s leading export industries if policy bottlenecks are removed and export-oriented incentives are introduced. They maintained that stronger support for exporters would not only increase foreign exchange earnings but also attract investment, create skilled jobs and strengthen Pakistan’s position in regional and global pharmaceutical markets.
Officials who attended the meetings were informed that the pharmaceutical industry remains committed to expanding exports and enhancing manufacturing capacity, but requires a more enabling policy environment to fully realise its potential.
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