Govt pushes private equity framework to unlock long-term capital

September 03, 2026 (MLN): Pakistan has accelerated efforts to develop a National Private Equity Policy Framework aimed at strengthening the country’s private equity ecosystem and attracting greater domestic and international long-term capital for productive investment.

Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb chaired the second meeting of the committee tasked with developing the framework, where progress on regulatory, taxation, institutional investment and legal work streams was reviewed.

The committee also congratulated the Finance Minister on Pakistan’s successful $3 billion dual-tranche Eurobond issuance, noting strong and diversified participation from international investors.

Muhammad Aurangzeb said the positive response from global capital markets reflected growing confidence in Pakistan’s economic direction and created an encouraging environment for deepening the equity side of the capital market.

The committee reviewed measures being considered by the State Bank of Pakistan to facilitate institutional participation in private equity, including investment, repatriation and exit mechanisms. Discussions also covered the accounting treatment of private equity investments under existing banking and IFRS requirements.

The committee emphasized the importance of creating an enabling environment for institutional investors, including banks, Development Finance Institutions, insurance companies and pension funds, while maintaining compliance with prudential and accounting standards.

Members also discussed tax neutrality for private equity structures to ensure that the pooling structure does not result in an additional layer of taxation, while taxation remains applicable at the level of those ultimately earning the income.

The existing income-distribution requirements for funds were examined, along with measures to facilitate genuine investment while preventing tax arbitrage and erosion of the tax base. The committee stressed the importance of appropriate disclosure, registration and anti-avoidance safeguards.

Tax treatment of capital gains arising from private-company transactions also came under discussion. Members emphasized the need for a framework that supports legitimate investment and exits without compromising safeguards against undervaluation and other potential misuse.

The committee highlighted the need for transparent and reliable valuation mechanisms for private-company transactions, with internationally recognized private equity valuation practices to be considered where appropriate.

Progress on the proposed legal and regulatory framework for private equity and venture capital was also reviewed, including ongoing work by the Securities and Exchange Commission of Pakistan (SECP).

The committee discussed measures to expand the domestic institutional investor base and establish a regulatory architecture offering greater clarity and certainty to investors and fund managers.

Muhammad  Aurangzeb termed private equity an important asset class for channeling patient, long-term capital into businesses and productive sectors.

He noted that a stronger domestic private equity market could help businesses secure growth capital, encourage investment and entrepreneurship, support employment and productivity, and provide investors with additional avenues for deploying long-term funds.

The Finance Minister stressed that the policy should focus on mobilizing actual capital rather than merely creating new financial structures.

He called for a credible domestic ecosystem capable of attracting Pakistani and international investors, developing local fund-management capabilities and connecting businesses with deeper pools of institutional capital.

The committee agreed to maintain close coordination among the regulatory, taxation and legal work streams and consolidate their recommendations into a coherent national framework.

Relevant institutions were directed to continue their technical assessments and resolve outstanding issues before presenting further recommendations to the committee.

Muhammad Aurangzeb stressed the need to maintain momentum and move from policy formulation toward implementation through a clear and sequenced approach.

He said the ultimate goal was to establish a competitive, transparent and well-regulated private equity environment that could diversify Pakistan’s financing landscape, complement bank and capital-market financing, and direct more long-term capital toward productive economic activity.

The meeting concluded with agreement to advance priority recommendations and continue work on the National Private Equity Policy Framework, incorporating safeguards against misuse and arbitrage while creating conditions for sustainable growth of the private equity market.

The meeting was attended by Advisor to the Prime Minister for Industries and Production Haroon Akhtar Khan, Advisor to the Prime Minister on Privatisation Muhammad Ali, Minister of State for Finance Bilal Azhar Kayani, Secretary Finance Imdad Ullah Bosal, and other committee members from the public and private sectors.

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