Key Takeaways
- • Pakistan's government is preparing a National Private Equity Framework targeting $10-15 billion in tax-neutral investment from domestic and international private equity players, according to Dawn.
- • The government aims to finalise the policy framework within two weeks, with policy actions to be introduced through the finance bill for FY27-28, and regulatory actions to follow immediately after finalisation.
- • The State Bank of Pakistan has raised the permissible investment limit for banks in a single private equity fund from 10 per cent to 20 per cent.
- • The framework proposes treating private equity funds as pass-through vehicles, with taxation applied at the investor level.
- • Finance Minister Muhammad Aurangzeb has prioritised mobilising domestic institutional capital before attracting foreign investors and international co-investment.
Summary
The government of Pakistan is set to roll out a new private equity policy framework covering enhanced risk portfolios, with a stated target of $10 to $15 billion in tax-neutral investment from domestic and international players, according to Dawn. The government aims to finalise the framework within the next two weeks. Policy actions would be introduced through the finance bill for the next fiscal year (FY27-28), while regulatory actions would follow immediately after finalisation without waiting for the next budget, an official told Dawn.
The framework draws on models in the United Kingdom, the Middle East and India, which are estimated to have attracted $100-150 billion. These points were conveyed to Finance Minister Muhammad Aurangzeb at a meeting of the prime minister's committee for developing the National Private Equity Framework. The meeting reviewed progress on regulatory and tax reforms, domestic capital mobilisation, and investment opportunities, including those arising from acquisitions, business consolidation, new projects and exits by existing investors.
On regulation, the State Bank of Pakistan briefed participants on recent changes, including raising the permissible investment limit for banks in a single private equity fund from 10 per cent to 20 per cent. A participant noted that bank exposure to real estate investment trusts had grown from Rs22 billion in 2021 to over Rs280 billion. The committee also discussed fund structures, transparency, investment arrangements and the participation of financial institutions in private equity funds.
On taxation, the committee reviewed recommendations for a clear, competitive and predictable framework, including treating private equity funds as pass-through vehicles with taxation at the investor level. Aurangzeb directed that any tax arrangements support legitimate investment while preventing tax arbitrage and regulatory inconsistencies. Mobilising domestic savings from banks, insurers, mutual funds, pension schemes, development finance institutions, local corporations and family offices was identified as the immediate priority, with foreign institutional investors, particularly from friendly nations, expected to follow. Informed sources said foreign investors have sought rules-based entry and exit arrangements. The committee also discussed a pipeline of investable opportunities over the next five to 10 years in minerals, real estate, agriculture, oil and gas, tourism and manufacturing.
The framework draws on models in the United Kingdom, the Middle East and India, which are estimated to have attracted $100-150 billion. These points were conveyed to Finance Minister Muhammad Aurangzeb at a meeting of the prime minister's committee for developing the National Private Equity Framework. The meeting reviewed progress on regulatory and tax reforms, domestic capital mobilisation, and investment opportunities, including those arising from acquisitions, business consolidation, new projects and exits by existing investors.
On regulation, the State Bank of Pakistan briefed participants on recent changes, including raising the permissible investment limit for banks in a single private equity fund from 10 per cent to 20 per cent. A participant noted that bank exposure to real estate investment trusts had grown from Rs22 billion in 2021 to over Rs280 billion. The committee also discussed fund structures, transparency, investment arrangements and the participation of financial institutions in private equity funds.
On taxation, the committee reviewed recommendations for a clear, competitive and predictable framework, including treating private equity funds as pass-through vehicles with taxation at the investor level. Aurangzeb directed that any tax arrangements support legitimate investment while preventing tax arbitrage and regulatory inconsistencies. Mobilising domestic savings from banks, insurers, mutual funds, pension schemes, development finance institutions, local corporations and family offices was identified as the immediate priority, with foreign institutional investors, particularly from friendly nations, expected to follow. Informed sources said foreign investors have sought rules-based entry and exit arrangements. The committee also discussed a pipeline of investable opportunities over the next five to 10 years in minerals, real estate, agriculture, oil and gas, tourism and manufacturing.
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