Key Takeaways
- • The State Bank of Pakistan (SBP) raised the permissible investment limit for banks in a single private equity fund from 10% to 20%, according to an official government statement.
- • The change was briefed at the third meeting of the committee developing the National Private Equity Framework, chaired by Finance Minister Senator Muhammad Aurangzeb on Monday.
- • The government is reviewing a proposed pass-through taxation framework under which private equity fund income would be taxed at the investor level rather than the fund level.
- • Aurangzeb designated domestic institutional capital mobilisation as the immediate priority, to lay a foundation for attracting foreign institutional investors and co-investment.
- • The committee is building a five-to-ten-year pipeline of private equity opportunities arising from acquisitions, consolidation, new projects and exits.
Summary
The State Bank of Pakistan (SBP) has increased the maximum amount banks may invest in a single private equity fund from 10% to 20%, a change the government presented as part of wider regulatory and tax reforms to develop Pakistan's private equity market. The move was discussed at the third meeting of the committee tasked with developing the National Private Equity Framework, chaired by Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb on Monday, according to an official statement.
The SBP briefed participants on the higher bank investment limit, and discussions also covered fund structures, transparency requirements and investment arrangements. On taxation, the committee reviewed proposals to treat private equity funds as pass-through vehicles, so that income would be taxed at the investor level rather than at the fund level. The government says the framework is intended to provide a clear, competitive and predictable tax environment. Aurangzeb asked stakeholders to examine international taxation models and adapt them to local conditions, while ensuring the framework does not create tax arbitrage, market distortions or regulatory inconsistencies, and called for coordination between regulatory and tax authorities.
Domestic capital mobilisation was a central theme. The committee discussed drawing capital from banks, insurance companies, mutual funds, pension schemes and development finance institutions, as well as local corporations and family offices. Aurangzeb said domestic mobilisation should remain the immediate priority, providing a base for attracting foreign institutional investors and international co-investment.
Participants also reviewed potential deal flow arising from acquisitions, business consolidation, new projects and exits by existing investors, with the aim of building a pipeline of commercially viable opportunities over the next five to ten years. Aurangzeb directed stakeholders to accelerate work on outstanding regulatory and tax matters so the National Private Equity Framework can move toward implementation, saying the initiative should deepen domestic capital markets, improve access to long-term risk capital and encourage private-sector investment. The meeting was attended by the Adviser to the Prime Minister on Privatisation, the Finance Secretary, the Chairman of the Federal Board of Revenue (FBR), and representatives of public- and private-sector institutions.
The SBP briefed participants on the higher bank investment limit, and discussions also covered fund structures, transparency requirements and investment arrangements. On taxation, the committee reviewed proposals to treat private equity funds as pass-through vehicles, so that income would be taxed at the investor level rather than at the fund level. The government says the framework is intended to provide a clear, competitive and predictable tax environment. Aurangzeb asked stakeholders to examine international taxation models and adapt them to local conditions, while ensuring the framework does not create tax arbitrage, market distortions or regulatory inconsistencies, and called for coordination between regulatory and tax authorities.
Domestic capital mobilisation was a central theme. The committee discussed drawing capital from banks, insurance companies, mutual funds, pension schemes and development finance institutions, as well as local corporations and family offices. Aurangzeb said domestic mobilisation should remain the immediate priority, providing a base for attracting foreign institutional investors and international co-investment.
Participants also reviewed potential deal flow arising from acquisitions, business consolidation, new projects and exits by existing investors, with the aim of building a pipeline of commercially viable opportunities over the next five to ten years. Aurangzeb directed stakeholders to accelerate work on outstanding regulatory and tax matters so the National Private Equity Framework can move toward implementation, saying the initiative should deepen domestic capital markets, improve access to long-term risk capital and encourage private-sector investment. The meeting was attended by the Adviser to the Prime Minister on Privatisation, the Finance Secretary, the Chairman of the Federal Board of Revenue (FBR), and representatives of public- and private-sector institutions.
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