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Tax law

Pakistan Unveils Long-Term Industrial Policy to Boost Economic Growth

Strategic Insights

— 2 min read

The Pakistani government has finalised a long-term industrial policy, recommending 10-year loans for industrial units with a two-year grace period to support manufacturing and reviving the industrial sector. The policy proposes reducing corporate tax from 29% to 26% over three years and amends existing laws such as the SECP Act, Anti-Money Laundering Act, and Income Tax Ordinance. The Prime Minister's Committee on Industrial Policy, led by Special Assistant to the Prime Minister (SAPM) on Industries and Production Haroon Akhtar Khan, reviewed and finalised the recommendations of eight specialised sub-committees. The policy aims to increase the industrial sector's share in GDP, which has declined from 26% in 1996 to 18% in 2025.

Key Takeaways:

  • The long-term industrial policy proposes 10-year loans for industrial units with a two-year grace period to support manufacturing.
  • The policy aims to reduce corporate tax from 29% to 26% over three years.
  • Amendments to the SECP Act, Anti-Money Laundering Act, and Income Tax Ordinance have been recommended.
  • Eight sub-committees were formed to address key challenges and their proposals include SBP guidelines for reviving sick industries and amending the Corporate Rehabilitation Act 2018.
  • Banks have been asked to use forecasting tools to detect early signs of distress.
  • A high-level meeting of the Prime Minister's Committee on Industrial Policy was held under the chairmanship of SAPM Haroon Akhtar Khan.
  • The government-owned banks must set annual targets for resolving non-performing loans and tied incentives such as bonuses or board fees may be offered to target achievement.
  • Third-party due diligence will be mandatory for loans up to Rs100 million and chartered accountancy firms or financial institutions will verify the due diligence.
  • The SBP will launch a portal displaying monthly sector and province-wise summaries, and a whistle-blower channel will be established to report misconduct or non-transparent dealings.

Statistics:

  • The industrial sector's share in GDP has declined from 26% in 1996 to 18% in 2025.
  • The policy aims to reduce corporate tax from 29% to 26% over three years.
  • Interest rates will be adjusted based on the policy rate and revival potential.
  • Loans may be extended for up to 10 years, with an optional two-year grace period.
  • Fresh working capital of up to 20% of the restructured principal will also be provided.
  • A haircut policy of up to 60% on the principal will be allowed under board-sanctioned approval.
  • Loan write-offs will qualify for tax deduction under Section 29.

Sources:

  • The News International (exact date not mentioned)
  • State Bank of Pakistan (SBP) guidelines (exact date not mentioned)
  • Corporate Rehabilitation Act 2018 (exact date not mentioned)

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