Industrial Revival: The Missing Pillar of Pakistan’s Economic Recovery

By Ahmed Ateeq

October 16, 2025 (MLN):

1. The Cost of Waiting

On July 24, 2025, the State Bank of Pakistan (SBP) introduced the 'Revival and Debt Resolution of Sick Industrial Units (RDRSIU-2025)' framework — a landmark initiative aimed at reviving distressed industries and addressing the buildup of non-performing loans (NPLs). Pakistan’s industrial base has contracted sharply in recent years, with over PKR 750 billion in industrial loans now classified as non-performing, representing nearly 28% of total corporate defaults. Approximately 60% of these units — primarily in textiles, steel, engineering, and chemicals — remain technically viable, possessing recoverable land, plant, and workforce. Rebuilding such facilities from scratch would cost over PKR 2.2 trillion, nearly three times the cost of structured revival. If even one-third of these units are successfully rehabilitated under RDRSIU-2025, Pakistan could unlock PKR 250–300 billion in reactivated credit, generate 400,000–500,000 jobs, and lift GDP by nearly 1% within 18 months.

2. The RDRSIU-2025 Framework

The SBP’s framework provides a comprehensive structure for debt restructuring, revival, and settlement of sick industrial units. It categorizes borrowers into four classes — Viable, Marginally Viable, Dormant, and Fraudulent — ensuring that only productive and recoverable units receive support.

Key features of RDRSIU-2025 include:
• Restructuring & Write-offs: Banks may extend loan tenors, reduce interest rates, and approve principal haircuts up to 60%, based on third-party viability assessments.
• Debt-to-Equity Conversions: Permitted where strategic investors or existing sponsors inject new equity.
• Revival Timelines: Settlements must be finalized within 12–24 months of approval.
• Reporting & Oversight: Banks must submit monthly progress reports to SBP.
• Supervisory Control: SBP will monitor implementation under its Prudential Regulations for industrial revival.

3. Quantitative Impact Projection (FY2026–27)

4. Regional and International Benchmarks

Pakistan’s RDRSIU-2025 framework aligns with successful global rehabilitation models. India’s IBC & SARFAESI Acts revived over USD 45 billion in assets, Vietnam’s Industrial Modernization Scheme (2019–2023) revitalized 1,200 factories generating 320,000 jobs, and Bangladesh’s Textile Restructuring Program (2020–2024) added USD 3.4 billion in exports. Meanwhile, Pakistan’s industrial GDP share fell from 20.9% in FY2016 to 16.3% in FY2024, with engineering goods imports rising by 37%. This framework represents Pakistan’s first serious attempt to reverse deindustrialization through financial realism.

5. Current Implementation Status

Despite the introduction of RDRSIU-2025 in July, no formal implementation or pilot rollout has occurred as of October 2025. The State Bank’s internal process has remained cautious and highly controlled, with decisions moving through multiple approval layers. While this prudence is understandable, the pace has been slow — leaving viable units and creditors in prolonged uncertainty. A framework designed to resolve distress within 12–24 months has already spent its first quarter in administrative suspension. The delay risks eroding both confidence and the intended economic impact of what remains one of Pakistan’s most pragmatic reform instruments.

6. Banking and Fiscal Synergy

Pakistan’s banking exposure to large-scale manufacturing exceeds PKR 2.8 trillion. Implementing RDRSIU-2025 could convert non-performing exposures into performing assets, release PKR 30–35 billion in provisions, and enable new credit worth PKR 200 billion. It represents a fiscal-neutral reform that strengthens both financial stability and industrial output — aligning with IMF’s long-term structural goals.

7. The Strategic Imperative

Industrial erosion is more than an economic concern — it is a sovereignty challenge. No country can sustain independent growth while relying on imported steel, machinery, or energy equipment. RDRSIU-2025 is not merely a banking framework; it is Pakistan’s opportunity to rebuild its industrial backbone and redefine self-reliant growth.

About the Author

Ahmed Ateeq is an investment banker and industrial strategist with over two decades of experience in development finance, restructuring, and industrial revival.

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