Pakistan’s planned private equity policy aims to attract $10–15 billion in tax-neutral investment from local and foreign investors, Dawn reported on 27 October. The private equity policy in Pakistan is being drafted by a Prime Minister’s committee, is due to be finalised in about two weeks, and would tax private equity funds through their investors rather than at fund level. For banks, insurers and family-owned companies, it could open a new route for long-term capital.
The short version
- A National Private Equity Framework targets $10–15 billion of tax-neutral investment, according to Dawn.
- Funds would be treated as pass-through vehicles, with tax charged at the investor level.
- Regulatory steps start once the framework is final; tax changes would come through the FY27-28 finance bill.
- Domestic money comes first, then foreign institutions and co-investors.
What happened
At a meeting on the framework, Finance Minister Muhammad Aurangzeb said mobilising domestic capital “should be the immediate priority”, Dawn reported. The plan covers acquisitions, business consolidation, new projects and exits by existing investors. It is modelled on arrangements in the UK, the Middle East and India, which the report says have attracted an estimated $100–150 billion.
The domestic money the government has in mind includes banks, insurers, mutual funds, pension schemes, development finance institutions, local companies and family offices. An unnamed official told Dawn that regulatory action would begin as soon as the framework is finalised, without waiting for the budget. Aurangzeb also asked officials to make sure the tax treatment supports genuine investment and does not create room for tax arbitrage, and to study international tax models before adapting one for Pakistan.
One participant pointed to real estate investment trusts (REITs) as proof that rule changes can move money. Bank exposure to REITs has grown from Rs22 billion in 2021 to more than Rs280 billion, according to the report.
Rule changes moved bank money into REITs almost 13-fold
Bank exposure to real estate investment trusts, Rs billion, 2021 vs October 2026
Why it matters
Pakistani companies rely heavily on bank loans, and borrowing has just become dearer: the SBP interest rate is now 12% after a 50bp hike. Equity from private funds is an alternative that does not need monthly interest payments. The groundwork has started already. The State Bank recently doubled the share of a single private equity fund a bank can own, from 10% to 20%, as we explained when SBP equity investment limits were relaxed for banks and funds. A pass-through tax rule is the other half. Without it, money can be taxed once inside the fund and again when it reaches investors, which makes funds less attractive than holding shares or bonds directly.
The knock-on effects
First order: a private equity policy for Pakistan’s big savers
Banks, insurers and pension funds get a clearer way to put long-term money into unlisted companies, within the limits the SBP has set.
Second order: more ways for companies to raise and exit
Family-owned firms and mid-sized companies could sell stakes, merge with rivals or fund new projects without going to the stock market. Existing investors would get a recognised exit route, which officials say foreign investors want.
Third order: a test for foreign capital
If domestic funds build a track record, foreign institutions and co-investors are next in the sequence. That would add non-debt foreign inflows at a time when most new foreign money has gone into government debt. The $10–15 billion figure is a target, not a forecast, and the investment pipeline is expected to build over five to 10 years.
Who could benefit
- Fund managers: a tax-neutral structure makes new private equity and venture funds easier to sell to investors.
- Banks and insurers: a new long-term asset class alongside government securities.
- Growing companies: equity for expansion or consolidation without adding to interest costs.
- Founders and early investors: clearer exit routes through sales to funds.
Who may face pressure
- The FBR: it must design rules that let tax flow through to investors without opening loopholes, as the finance minister instructed.
- Regulators: the SECP and SBP will need to align fund, banking and tax rules quickly if the two-week timeline holds.
- Companies with weak governance: private equity money usually comes with board seats, audits and reporting demands.
What to watch
- Whether the framework is finalised in about two weeks, by mid-November 2026.
- The first regulatory steps from the SECP and SBP after finalisation.
- The pass-through tax rules in the FY27-28 finance bill, which comes with the budget usually presented in June.
- Whether banks use the higher 20% single-fund limit.
Sources
- Dawn, New private equity policy framework on the horizon to bring over $10bn in investments, 27 October 2026
This is analysis, not investment advice. Figures are as of 28 October 2026.
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