Key Takeaways
- • Pakistan's federal government plans to introduce a national private equity framework within two weeks, targeting $10 billion to $15 billion in tax-neutral domestic and foreign investment, according to Dawn.
- • Regulatory changes will take effect immediately after finalisation, while tax measures will be incorporated into the Finance Bill for fiscal year 2027-28.
- • The State Bank of Pakistan proposed raising the permissible bank investment limit in a single private equity fund from 10% to 20%.
- • The committee is considering treating private equity funds as pass-through vehicles, with taxes levied at the investor rather than fund level.
- • Officials prioritise mobilising domestic institutional capital first to build a credible market before attracting foreign investors.
Summary
The federal government of Pakistan plans to introduce a national private equity framework within two weeks, aiming to attract between $10 billion and $15 billion in tax-neutral domestic and foreign investment and to improve access to long-term risk capital, Dawn reported. The proposed policy was discussed at a recent meeting of the prime minister's committee on the National Private Equity Framework, chaired by Finance Minister Muhammad Aurangzeb.
The framework draws on private equity models in the United Kingdom, the Middle East and India, with a focus on creating predictable rules for investment, fund management and investor exits. According to officials, regulatory changes would be introduced immediately after the framework is finalised, while taxation measures would be incorporated into the Finance Bill for fiscal year 2027-28.
The committee reviewed opportunities to mobilise capital from banks, insurance companies, mutual funds, pension schemes, development finance institutions, corporations and family offices. It also discussed building a pipeline of investment opportunities through acquisitions, business consolidation, new projects and exits by existing investors over the next five to 10 years.
The State Bank of Pakistan briefed participants on regulatory changes, including an increase in the permissible investment limit for banks in a single private equity fund from 10% to 20%. The meeting was also told that earlier regulatory changes allowing greater bank exposure to real estate investment trusts had helped grow the sector's portfolio from Rs22 billion in 2021 to more than Rs280 billion.
On taxation, the committee considered treating private equity funds as pass-through investment vehicles, under which taxes would be levied at the investor level rather than the fund level. Aurangzeb directed officials to examine international tax models and ensure incentives support legitimate investment without creating opportunities for tax arbitrage or regulatory inconsistencies. He emphasised that mobilising domestic institutional capital should be the immediate priority to establish a credible private equity market capable of later attracting foreign investors, and called for resolving outstanding regulatory and taxation issues and identifying commercially viable opportunities.
The framework draws on private equity models in the United Kingdom, the Middle East and India, with a focus on creating predictable rules for investment, fund management and investor exits. According to officials, regulatory changes would be introduced immediately after the framework is finalised, while taxation measures would be incorporated into the Finance Bill for fiscal year 2027-28.
The committee reviewed opportunities to mobilise capital from banks, insurance companies, mutual funds, pension schemes, development finance institutions, corporations and family offices. It also discussed building a pipeline of investment opportunities through acquisitions, business consolidation, new projects and exits by existing investors over the next five to 10 years.
The State Bank of Pakistan briefed participants on regulatory changes, including an increase in the permissible investment limit for banks in a single private equity fund from 10% to 20%. The meeting was also told that earlier regulatory changes allowing greater bank exposure to real estate investment trusts had helped grow the sector's portfolio from Rs22 billion in 2021 to more than Rs280 billion.
On taxation, the committee considered treating private equity funds as pass-through investment vehicles, under which taxes would be levied at the investor level rather than the fund level. Aurangzeb directed officials to examine international tax models and ensure incentives support legitimate investment without creating opportunities for tax arbitrage or regulatory inconsistencies. He emphasised that mobilising domestic institutional capital should be the immediate priority to establish a credible private equity market capable of later attracting foreign investors, and called for resolving outstanding regulatory and taxation issues and identifying commercially viable opportunities.
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