Pakistan is preparing a new private equity framework aimed at attracting $10 billion to $15 billion in tax-neutral investment from domestic and international investors, as the government seeks to channel more capital into businesses and commercially viable projects.
The government plans to finalize the framework within the next two weeks, with policy measures to be included in the Finance Bill for fiscal year 2027 to 2028.
According to a report, regulatory changes, however, are expected to begin immediately after the framework is finalized, without waiting for the next budget.
Pakistan Looks to Global Private Equity Models
The proposed framework draws on models in the United Kingdom, the Middle East and India, which are estimated to have attracted $100 billion to $150 billion in investment. The approach was presented to Finance Minister Muhammad Aurangzeb during a meeting of the prime minister's committee tasked with developing the National Private Equity Framework.
The meeting reviewed regulatory and tax reforms, domestic capital mobilization and opportunities to build a stronger private equity market. Participants also examined investment potential from acquisitions, business consolidation, new projects and exits by existing investors.
Government Seeks More Domestic Investment
The committee discussed ways to channel funds held by banks, insurance companies, mutual funds, pension schemes and development finance institutions into private equity. Local corporations and family offices were also identified as potential sources of investment.
A participant said regulatory changes allowing banks to increase their exposure to real estate investment trusts (REITs) had helped expand the sector's portfolio from Rs. 22 billion in 2021 to more than Rs. 280 billion. The participant said private equity investment could grow substantially if Pakistan established a supportive investment environment.
Investors Seek Clear Rules and Exit Options
Officials said foreign investors and institutional funds, particularly those from friendly countries, typically seek a clear policy framework with predictable entry and exit rules before committing capital.
The requirement becomes particularly important when Pakistani government delegations present investment opportunities in sectors such as minerals, real estate, agriculture, oil and gas, tourism and manufacturing.
The committee also discussed developing a pipeline of investment opportunities over the next five to 10 years, supported by domestic liquidity that could be directed toward productive economic activity.
SBP Eases Bank Investment Limits
The State Bank of Pakistan briefed participants on recent regulatory changes, including an increase in the permissible investment limit for banks in a single private equity fund from 10 percent to 20 percent.
The committee also reviewed proposed changes to fund structures, transparency requirements and financial institutions' participation in private equity funds.
Government Reviews Tax Changes for Private Equity
On taxation, the meeting considered proposals for a clear and predictable framework, including treating private equity funds as pass through vehicles, with taxes applied at the investor level.
Aurangzeb called for international tax models to be assessed and adapted to Pakistan's economic and regulatory conditions. He said the proposed arrangements should support legitimate investment while preventing tax arbitrage, unintended distortions and regulatory inconsistencies.
The finance minister also emphasized that mobilizing domestic capital should be the immediate priority, laying the groundwork for attracting foreign institutional investors and international co investment.
He directed stakeholders to resolve outstanding regulatory and tax issues, identify commercially viable investment opportunities and move the National Private Equity Framework toward implementation.
