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Pakistan’s Federal Board of Revenue (FBR) has introduced a new compliance requirement for the steel industry, directing registered manufacturers to install digital production monitoring systems by December 30, 2026. The initiative aims to strengthen oversight of steel production, improve transparency in product movement and reduce the risk of tax evasion.

The directive, issued under Sales Tax General Order (STGO) No. 29 of 2026, applies to steel manufacturers operating under the Sales Tax Act, 1990, and the Sales Tax Rules, 2006.

Which Steel Businesses Must Comply?

The new requirement covers three major categories of steel manufacturers:

• Steel melters: Businesses producing billets, ingots and other primary steel materials.
• Steel re-rollers: Units processing semi-finished steel into products such as bars, rods and reinforcing steel.
• Composite manufacturing units: Facilities carrying out multiple stages of steel production.

All registered manufacturers falling within the order’s scope must ensure that their production facilities and active manufacturing lines are equipped with the prescribed monitoring technology before the deadline.

How Will the New Monitoring System Work?

Under the FBR’s instructions, manufacturers will be required to use electronic systems that track production and record the movement of finished goods.

The technology will identify products, count output, verify dimensions and measure weight. Dispatches will also be documented through integrated weighbridges, capturing information such as vehicle registration numbers, estimated shipment weights and other relevant dispatch details.

By collecting this information electronically, the FBR will be able to compare reported production with actual shipments and investigate differences that could indicate unreported output or irregularities.

The system is intended to provide tax authorities with a clearer picture of manufacturing activity and the movement of steel products throughout the supply chain.

Installation Through FBR-Approved Vendors

Steel manufacturers must obtain and install the required equipment through vendors authorized by the FBR. The order identifies ISSM Labelling Solutions and Obsidian among the approved providers.

Businesses will also be responsible for keeping the systems operational and ensuring that the collected information is transmitted securely and continuously to the FBR’s Central Control Unit.

Simply installing the equipment will not be sufficient. Manufacturers must maintain its proper functioning and comply with the reporting and data-transmission requirements specified in the order.

Strict Rules for Equipment Failures and Operational Changes

The new framework introduces specific reporting obligations for manufacturers.

Any system breakdown, equipment damage or suspected tampering must be reported to the relevant authorities within one hour. Businesses must also provide 30 days’ advance notice of changes that could affect their production lines or dispatch arrangements.

These provisions are intended to help the FBR maintain uninterrupted monitoring and identify potential gaps in production records.

Steel Dispatches Without Digital Records Prohibited

One of the most significant provisions of the order concerns the movement of steel products. Manufacturers covered by the directive will not be permitted to remove or supply specified goods unless their production and dispatches have been recorded through the approved monitoring system.

Traditional documentation alone will not meet the new requirements. The FBR has clarified that manual registers, privately installed cameras and independent weighbridge records cannot replace the prescribed electronic monitoring arrangements.

This makes digital traceability a central part of the compliance process for affected steel businesses.

FBR to Monitor Implementation Across the Industry

The FBR has instructed Chief Commissioners Inland Revenue to identify operational steel manufacturing facilities, supervise the installation process and ensure that businesses follow the new rules.

Manufacturers that fail to install or operate the required equipment, remove goods without proper electronic records, conceal production facilities or interfere with monitoring devices may face legal action under the applicable sales tax legislation and rules.

The potential consequences make timely preparation essential for businesses that fall within the scope of the order.

What Should Steel Manufacturers Do Before the Deadline?

With December 30, 2026, set as the compliance deadline, affected businesses should begin reviewing their existing production and dispatch procedures.

Manufacturers should confirm whether their facilities fall under the order, contact an authorized vendor, assess the equipment required for each active production line and make arrangements for installation and testing. They should also establish internal procedures for reporting technical failures, notifying authorities about operational changes and maintaining reliable electronic records.

Early preparation can help businesses avoid last-minute installation difficulties and reduce the risk of disruption to their operations.

Conclusion

The FBR’s new production monitoring requirement represents a significant compliance development for Pakistan’s steel industry. By requiring electronic tracking of manufacturing output and dispatches, the tax authority aims to improve reporting accuracy, strengthen enforcement and discourage the movement of unrecorded goods.

For registered steel melters, re-rollers and composite manufacturers covered by the order, December 30, 2026, is the key deadline. Businesses should take the necessary steps to install and operate the approved systems, understand their reporting obligations and ensure that steel production and dispatches are properly recorded.

Compliance will be important not only for meeting the FBR’s requirements but also for maintaining smooth business operations under the updated regulatory framework.

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Pakistan’s federal government is considering major changes to the country’s tax administration, including the possibility of establishing a new tax collection agency or further restructuring the Federal Board of Revenue (FBR). The move comes amid concerns over revenue performance and the limited results of previous reform efforts.

Prime Minister Shehbaz Sharif has directed the FBR to prepare a comprehensive reform plan by October 19, covering human resources, institutional restructuring, and administrative improvements. The proposals are expected to help the government determine how Pakistan’s tax collection system can become more effective.

Government Explores Options for Tax Administration Reform

The idea of creating a separate national tax collection agency was discussed during a high-level government meeting held last Saturday. Following the meeting, FBR Chairman Rashid Langrial instructed officials to prepare recommendations for consideration by the prime minister.

However, the government has not yet made a final decision. Discussions are still at an early stage, and officials are examining different approaches to improving the existing system before determining the next course of action.

According to reports published by The Express Tribune, the FBR is working on proposals in line with the prime minister’s instructions. The board has indicated that the current emphasis remains on strengthening existing operations through staffing changes, improved technology, and more efficient administrative procedures.

The FBR has also dismissed speculation that tax collection responsibilities could be handed over to a private company.

What Could a New Tax Agency Mean for the FBR?

One proposal under consideration involves establishing a separate tax collection organisation while allowing the FBR to continue operating alongside it. Under this arrangement, employees who do not move to the new institution could remain in their existing positions until retirement.

Such a change would require significant legal and administrative adjustments. Establishing a new agency with powers currently held by the FBR could involve amendments to the Federal Board of Revenue Act, 2007, as well as changes to other relevant tax laws.

The final structure will depend on the government’s assessment of the available options and the recommendations submitted by the FBR.

Previous Reform Efforts Have Yet to Resolve Key Challenges

Pakistan has attempted to modernize its tax administration several times over the past two decades. These initiatives have included transforming the Central Board of Revenue into the FBR, reorganizing employee service structures, and introducing changes to the institution’s operational framework.

In 2024, the government also launched a transformation programme worth more than Rs55 billion to improve the tax system. An earlier proposal under the caretaker government sought to separate Customs operations from Inland Revenue functions.

Despite these efforts, concerns about revenue collection and the country’s narrow tax base remain central to the government’s economic agenda. The latest discussions reflect another attempt to address longstanding structural challenges within the tax administration.

Pakistan Faces Pressure to Increase Tax Revenue

The proposed reforms come at a time when Pakistan is under pressure to strengthen public finances and improve domestic revenue generation.

The country’s tax-to-GDP ratio stood at 10.3% in the previous fiscal year, while the FBR collected more than Rs1.1 trillion less than its original annual target. These figures highlight the gap between the government’s revenue ambitions and actual collection performance.

For the current fiscal year, the government has set an ambitious tax collection target of Rs15.263 trillion. Achieving this goal would require revenue growth of more than 17%, placing additional pressure on the tax administration to improve compliance and collection efficiency.

Expanding the number of taxpayers, reducing tax evasion, improving documentation of economic activity, and making tax procedures more transparent are among the broader issues facing Pakistan’s revenue system.

Technology and Administrative Changes Could Play a Key Role

Whether the government establishes a new agency or restructures the FBR, the effectiveness of the reforms will depend on their implementation.

Better digital systems could help identify undeclared economic activity, improve monitoring, and reduce opportunities for errors or manipulation. Clearer accountability mechanisms and more efficient internal processes could also support better performance.

At the same time, institutional restructuring alone may not be sufficient to address the country’s revenue challenges. Sustainable improvements will also depend on broader tax policy, compliance, public confidence, and the government’s ability to bring more economic activity into the documented tax system.

October 19 Deadline Could Shape the Next Phase

Prime Minister Shehbaz Sharif is expected to review the FBR’s reform proposals on October 19. The review could help clarify whether the government intends to retain the existing institutional structure with significant changes or move towards creating a separate tax collection agency.

For now, the proposal remains under consideration, and no final policy decision has been announced.

The outcome could have important implications for Pakistan’s tax administration, government revenue, and the way individuals and businesses interact with the tax system. The key question is whether the proposed changes will deliver lasting improvements in tax collection, institutional accountability, and compliance.

Ultimately, the success of the reform process will be measured not simply by the creation of a new organization or changes to the FBR’s structure, but by its ability to produce more consistent revenue growth and a more transparent, efficient tax system.

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Pakistan’s agricultural sector could see significant changes under a new proposal by the Securities and Exchange Commission of Pakistan (SECP) to establish a national agricultural spot market. The proposed initiative aims to create a more organized system for buying and selling agricultural commodities while helping farmers secure better prices, reduce crop wastage and obtain financing through formal channels.

The planned digital marketplace would bring farmers, commodity buyers, warehouse operators and banks onto a common platform. By introducing transparent trading procedures and modern storage arrangements, the initiative seeks to address some of the longstanding problems affecting Pakistan’s agricultural supply chain.

SECP Introduces a New Vision for Agricultural Markets

SECP Chairman Dr Kabir Ahmed Sidhu presented the proposal at the Pakistan Institute of Development Economics’ international conference, “Mission 100 Billion Dollars.”

The proposed system would rely on digital trading, standardized commodity grading and electronic warehouse receipts to improve the efficiency of agricultural transactions. Rather than depending entirely on traditional market arrangements, farmers could access a more transparent mechanism for finding buyers and negotiating prices.

Under the suggested framework, provincial authorities would continue regulating agricultural markets, while the SECP would help develop the technological systems needed to support the initiative.

The proposal reflects an effort to modernize agricultural commerce and establish stronger links between farming, financial services and commodity markets.

Reducing Agricultural Waste Could Deliver Major Economic Benefits

Crop losses after harvesting remain a significant challenge for Pakistan. Inadequate storage, inefficient transportation and limited access to suitable facilities can force farmers to sell produce quickly or allow crops to deteriorate before reaching consumers.

According to figures presented by the SECP chairman, post-harvest losses are estimated at between 20 and 40 per cent. With crop production valued at approximately Rs8.8 trillion, these losses represent a substantial economic burden.

Agriculture accounts for around 23.44 per cent of Pakistan’s gross domestic product, making improvements in this sector important for rural livelihoods and overall economic performance.

Sidhu estimated that reducing crop losses by just one percentage point could preserve approximately Rs88 billion in economic value.

Expanding storage facilities and improving supply chain management could therefore help farmers retain more of their produce, reduce unnecessary waste and increase the availability of agricultural commodities in domestic markets.

Limited Storage Capacity Remains a Major Concern

Pakistan’s existing warehouse infrastructure is considerably smaller than the volume of agricultural commodities produced each year.

The SECP chairman cited approved warehouse capacity of approximately 326,000 metric tonnes, compared with annual production of around 55.7 million metric tonnes of dry agricultural commodities suitable for conventional storage.

This imbalance highlights the need for investment in modern warehouses, temperature-controlled storage and more efficient distribution networks.

Better storage facilities would allow farmers to preserve crop quality for longer periods. They could also help stabilize supplies, reduce seasonal pressure on prices and improve the reliability of agricultural exports.

Encouraging private investment in storage infrastructure could be an important part of addressing this challenge.

Digital Warehouse Receipts Could Open New Financing Opportunities

One of the most important elements of the proposed marketplace is its plan to introduce electronic warehouse receipts.

Under the proposed arrangement, farmers would store their produce in approved warehouses and receive electronic documents confirming the quantity and ownership of their stored commodities. These receipts could then be presented to banks as collateral for loans.

This mechanism could give farmers greater financial flexibility after harvesting. Many producers need immediate cash to repay existing debts, cover household expenses or prepare for the next growing season. As a result, they may have little choice but to sell their crops when market prices are relatively low.

Access to loans against stored produce could reduce this pressure and allow farmers to make selling decisions based on market conditions rather than urgent financial needs.

The system could also help connect agricultural production with formal banking services, although its success would depend on reliable warehouse operations, appropriate lending arrangements and effective protection against fraud.

Wheat, Rice, Maize, Cotton and Sugar in the Initial Phases

The SECP has proposed introducing the digital marketplace in stages, initially focusing on wheat, rice, maize, cotton and sugar.

Standardized grading and quality assessment would help ensure that commodities are evaluated according to consistent requirements. Transparent bidding would allow buyers to compete for available produce, potentially improving price discovery.

Digital records of transactions and commodity inventories could also make it easier to monitor market activity and reduce opportunities for manipulation.

The proposal further calls for the registration of traders and commission agents to improve accountability across the trading process.

However, digital systems will need to be supported by reliable payment arrangements, clear rules for resolving disputes and practical procedures for moving commodities between markets and storage facilities.

Better Price Discovery Could Strengthen Farmers’ Bargaining Power

Farmers often have limited access to information about prevailing prices in different markets. This can weaken their negotiating position, particularly when they depend on intermediaries to sell their produce.

A nationwide digital platform could help address this information gap by making bids and trading activity more transparent.

With access to a broader pool of buyers, farmers could potentially identify more competitive offers and make better-informed selling decisions. Standardized quality assessments could also help buyers distinguish between different grades of produce and pay accordingly.

Nevertheless, better prices would not be guaranteed automatically. The actual benefits would depend on the number of active buyers, the competitiveness of bidding, transportation costs and farmers’ ability to access the platform.

Ensuring that smallholders can participate on fair terms will be essential to achieving the proposal’s intended goals.

Coordination and Infrastructure Will Be Critical

Establishing a national agricultural spot market will require cooperation among provincial governments, financial institutions, warehouse operators, traders and technology providers.

Provincial differences in agricultural market regulations, licensing requirements, fees and commodity transportation procedures could create implementation challenges if they are not addressed effectively.

The country will also need sufficient certified warehouses, dependable quality inspection services and secure electronic recordkeeping systems.

Farmer awareness will be another important consideration. Training and accessible digital services could help rural communities understand how to use the platform, obtain financing and participate in competitive trading.

Without these supporting measures, the marketplace may struggle to deliver its full potential.

SECP Also Targets Broader Financial Market Reforms

In addition to the agricultural initiative, the SECP chairman discussed plans to expand participation in Pakistan’s capital markets.

The regulator aims to increase the stock market investor base to 2.5 million through measures that include financial education campaigns for young people and simpler procedures for opening investment accounts.

The SECP also highlighted the importance of investor protection, dependable financial reporting and stronger supervision of audit firms. An independent legal framework for overseeing audit firms was discussed as a way to improve corporate disclosures and reinforce confidence in the financial system.

These measures form part of a broader effort to encourage financial inclusion and improve transparency across Pakistan’s markets.

Conclusion

The proposed national agricultural spot market offers Pakistan an opportunity to improve agricultural trading through digital technology, better storage and stronger connections with the banking sector.

By enabling farmers to store their crops, access financing and participate in more transparent bidding, the initiative could help reduce post-harvest losses and improve their ability to negotiate competitive prices.

However, achieving these outcomes will require more than a digital platform. Investment in warehouses, effective regulation, reliable payments and inclusive access for small-scale farmers will be equally important.

If implemented successfully, the proposal could contribute to a more efficient agricultural supply chain, stronger rural incomes and a more resilient economy. The key challenge will be ensuring that the planned reforms translate into practical, measurable benefits for farmers throughout Pakistan.

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Pakistan’s economic recovery, fiscal reforms and long-term development priorities came under discussion during a meeting between International Monetary Fund (IMF) Deputy Managing Director Nigel Clarke and Federal Finance Minister Muhammad Aurangzeb on the sidelines of the World Bank Group–IMF Annual Meetings 2026 in Bangkok, Thailand.

During the meeting, Clarke stressed the need for Pakistan to strengthen its revenue collection system and maintain adequate foreign exchange reserves to support sustainable economic growth. He highlighted the importance of investing in human capital, infrastructure, healthcare, education and other essential public services while maintaining fiscal discipline.

IMF Highlights the Need for Stronger Economic Foundations

The IMF official emphasized that a stable economic environment requires consistent policies, effective revenue mobilization and sufficient financial buffers to manage unexpected economic challenges. For Pakistan, these measures are particularly important given its exposure to external financial pressures, climate-related risks and regional uncertainties.

Improved tax collection could help the government generate additional resources for development without relying excessively on borrowing. Similarly, maintaining sufficient foreign exchange reserves can strengthen the country’s ability to meet external payment obligations and manage economic shocks.

The discussions also focused on ensuring that fiscal adjustments do not undermine spending on essential services, particularly health and education, which are important for improving living standards and supporting long-term productivity.

Finance Minister Highlights Progress on Key Economic Indicators

Finance Minister Muhammad Aurangzeb briefed the IMF leadership on Pakistan’s recent economic performance and ongoing reform efforts. He pointed to a fiscal deficit that has fallen to a 22-year low, alongside three consecutive years of primary budget surpluses.

Pakistan’s economy recorded growth of 3.7%, according to the figures cited by the finance minister. He also highlighted improvements in foreign exchange reserves, which he said had reached a historically high level sufficient to cover approximately three months of imports.

These developments, according to Aurangzeb, reflect progress in stabilizing the economy and strengthening its capacity to withstand financial pressures. He also referred to sovereign credit rating upgrades, Pakistan’s September Eurobond issuance and the IMF staff-level agreement reached on October 7 as signs of renewed engagement with international financial markets.

However, sustaining these gains will require continued policy consistency, stronger domestic revenue generation and reforms that encourage private investment and productive economic activity.

Targeted Subsidies to Protect Vulnerable Households

The government also discussed measures to reduce the impact of economic pressures on low-income households. Aurangzeb outlined targeted fuel subsidies designed to provide relief to vulnerable segments of society while preserving social stability.

He emphasized that such support should remain targeted, time-bound and budget-neutral. This approach aims to help households facing financial difficulties without placing additional strain on public finances.

The challenge for policymakers will be to balance immediate relief with longer-term economic priorities. Well-designed assistance programmed can help protect vulnerable communities while allowing the government to maintain fiscal discipline and direct resources towards development.

Regional Cooperation and Economic Resilience

Beyond Pakistan’s domestic economic situation, Aurangzeb highlighted broader regional challenges during the Middle East, North Africa, Afghanistan and Pakistan (MENAP) meeting with the IMF Managing Director.

He called for greater diversification of energy supplies and trade routes to reduce exposure to external disruptions. He also stressed the importance of stronger regional economic integration and increased investment in logistics and food systems.

For Pakistan, improving trade connectivity and strengthening supply chains could create opportunities to expand exports, attract investment and reduce vulnerability to international market fluctuations. Greater cooperation among regional economies may also help improve access to essential goods and support economic resilience.

The finance minister reaffirmed Pakistan’s commitment to multilateral cooperation and expressed the country’s willingness to contribute to regional initiatives aimed at promoting shared economic progress.

The Road Ahead for Pakistan’s Economy

Pakistan’s reported fiscal improvements and economic growth provide a basis for continued stabilization, but maintaining progress will depend on addressing structural weaknesses. Broadening the tax base, improving tax compliance, encouraging exports, strengthening public financial management and creating a more predictable environment for investment remain important priorities.

Equally significant is the need to ensure that economic reforms translate into tangible benefits for ordinary citizens. Sustainable growth requires not only stronger financial indicators but also better employment opportunities, improved public services and greater protection for vulnerable households.

The IMF’s message reinforces the importance of combining financial stability with development spending. Adequate foreign exchange reserves can provide a cushion against external shocks, while stronger domestic revenues can help finance infrastructure, education, healthcare and other essential services.

Conclusion

The meeting between Nigel Clarke and Muhammad Aurangzeb highlighted the connection between economic stability and Pakistan’s long-term development ambitions. While the government has reported progress in reducing the fiscal deficit, maintaining primary surpluses and supporting economic growth, continued reforms will be essential to preserve these gains.

Pakistan’s future economic performance will depend on its ability to mobilize domestic resources, maintain adequate reserves, protect vulnerable communities and create opportunities for sustainable investment. Achieving these objectives could help the country move towards a more resilient economy in which financial stability supports inclusive and lasting development.

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The State Bank of Pakistan (SBP) has introduced the second edition of its Banking on Equality (BoE) Policy for 2026, reaffirming its commitment to improving women’s access to financial services and promoting gender equality in the banking sector. The policy aims to reduce the gender gap in financial inclusion to 25% by 2028 as part of the National Financial Inclusion Strategy (NFIS).

The updated policy builds on the progress achieved since the launch of the original initiative in 2021. It introduces additional measures to encourage women’s participation in banking, expand digital financial services, support women-led businesses and improve access to financing across different economic sectors.

Progress in Women’s Financial Inclusion

Pakistan has made notable progress in reducing disparities in financial inclusion over the past few years. According to SBP, the gender gap in financial inclusion declined from 39% in 2021 to 29% in 2025.

The earlier Banking on Equality Policy also contributed to greater female representation in the banking workforce. Banks recruited more than 17,500 women during this period, while the proportion of female employees increased from 13% to 17%. Several banks also established dedicated departments and teams to develop financial products and services tailored to women’s needs.

Building on these achievements, the new policy aims to accelerate progress and address the remaining barriers that limit women’s participation in the formal financial system.

More Employment Opportunities for Women in Banking

One of the major priorities of BoE 2026 is to improve women’s representation and career development within financial institutions. The policy establishes targets relating to women’s recruitment, customer outreach and participation in branchless banking networks.

It also encourages banks to introduce workplace facilities, including daycare services for working mothers. In addition, financial institutions are advised to develop clear career progression policies that help women advance into senior management and leadership positions.

These measures are intended to create a more supportive working environment, improve employee retention and expand women’s professional opportunities within the banking industry.

Expanding Digital Banking Access

Digital financial services are another important focus of the updated policy. SBP aims to make banking more accessible to women through targeted digital onboarding campaigns, simplified account-opening procedures and digital payment solutions designed around their financial needs.

The policy also promotes the use of digital payments among women-led businesses. Better access to mobile banking, electronic transactions and other digital services can help women manage their finances more conveniently and participate more actively in economic activities.

By reducing barriers to opening and using accounts, these initiatives could also encourage greater participation among women who have traditionally remained outside the formal banking system.

Improving Financing for Women-Owned Businesses

Access to finance remains a significant challenge for many women entrepreneurs, particularly those operating micro, small and medium-sized enterprises (MSMEs). Limited credit histories, insufficient collateral and complex lending requirements can make it difficult for women to secure loans from traditional financial institutions.

To address these challenges, BoE 2026 encourages banks to increase the participation of women borrowers across key financing segments. It also promotes gender-sensitive credit planning and the development of specialized financing products that better reflect the needs of women-owned and women-led enterprises.

Financial institutions are encouraged to use alternative credit assessment methods, reconsider conventional collateral requirements where appropriate, and collaborate with fintech companies to expand lending opportunities.

These steps could help women entrepreneurs obtain the funding needed to establish businesses, expand operations, create employment and contribute to Pakistan’s economic development.

Strengthening Financial Literacy and Entrepreneurship

Improving access to banking services alone may not be sufficient to achieve meaningful financial inclusion. Women also need the knowledge, confidence and resources to make informed financial decisions.

Recognizing this need, the new policy emphasizes financial literacy, entrepreneurship development and support mechanisms that encourage women to engage with formal financial services.

Through dedicated support hubs and targeted educational initiatives, the policy seeks to improve women’s understanding of savings, borrowing, digital payments and business financing. Greater financial awareness can help women manage their resources effectively and make better use of available banking products.

Stronger Monitoring and Implementation

To ensure that the policy delivers measurable results, SBP plans to introduce a structured monitoring and evaluation framework. Banks will be required to provide quarterly data, while regular mystery shopping exercises will help assess how effectively financial institutions are implementing the policy’s requirements.

The use of gender-disaggregated data will also allow policymakers and banks to identify gaps in service delivery, monitor progress and develop more targeted financial products.

This approach is intended to strengthen accountability and ensure that the policy’s objectives translate into practical improvements for women across Pakistan.

Supporting National and International Financial Inclusion Goals

The Banking on Equality Policy 2026 forms part of SBP’s broader Vision 2028 and supports the country’s efforts to build a more inclusive financial system. It will also contribute to the implementation of the World Bank-led Women Entrepreneurship Finance Code initiative.

The policy was finalized following consultations with local and international stakeholders, reflecting a broader effort to improve women’s access to financial resources and economic opportunities.

SBP’s earlier efforts under the original policy were also recognized by the Alliance for Financial Inclusion (AFI), which presented the central bank with the Policy Achievement Award for Gender Inclusive Finance 2026.

Conclusion

The launch of the Banking on Equality Policy 2026 represents another step towards reducing gender disparities in Pakistan’s financial sector. By focusing on women’s employment, digital banking, business financing and financial education, SBP aims to create a more accessible and supportive financial environment.

Reducing the gender gap in financial inclusion to 25% by 2028 will require sustained cooperation between banks, regulators, technology providers and other stakeholders. Effective implementation and regular monitoring will be essential to achieving this target.

If successfully implemented, the policy could help more women gain access to financial services, establish and grow businesses, pursue professional advancement and participate more fully in Pakistan’s economic development.

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Pakistan is taking new steps towards modernizing its financial sector by exploring digital bonds, asset tokenization and artificial intelligence (AI)-powered financial services in collaboration with the World Bank Group. The development comes as the country works to establish a regulated environment for virtual assets and attract both domestic and international businesses.

According to the Pakistan Virtual Assets Regulatory Authority (PVARA), around 75 local and foreign companies have submitted applications to obtain licenses to operate in Pakistan’s virtual asset market. This growing interest reflects the potential for digital finance to become an important part of the country’s economic and technological development.

Pakistan and the World Bank Discuss Financial Innovation

Bilal bin Saqib, Minister of State and Chairman of PVARA, recently held discussions with Jorge Familiar, Vice President and Treasurer of the World Bank Group, during the IMF-World Bank Annual Meetings in Bangkok.

The meeting focused on possible cooperation in digital financial products, including tokenized assets, digital bonds and AI-based financial operations. Both sides also discussed sharing technical expertise, strengthening institutional capabilities and using modern financial technologies to improve Pakistan’s capital markets.

The proposed collaboration could help Pakistan explore more efficient financial systems, improve access to investment opportunities and strengthen investor protection. Better settlement mechanisms and stronger regulatory safeguards were also among the key areas of interest.

From Restrictions to a Regulated Virtual Asset Market

Pakistan’s approach to virtual assets has been evolving as policymakers seek to move away from restrictions towards a formal regulatory structure.

Bilal bin Saqib stated that significant progress had been made within approximately 15 months. He highlighted the introduction of the Virtual Assets Act 2026, changes to the banking restrictions previously imposed by the State Bank of Pakistan in 2018, and the development of licensing rules.

According to his statement on social media, PVARA has received 75 applications from companies interested in entering the country’s virtual asset industry. These applications include both Pakistani businesses and international firms looking to explore opportunities in the emerging market.

However, receiving applications does not mean that all applicants will receive approval. Licensing and regulatory assessments will remain important steps in determining which companies can legally operate in the sector.

What Is Asset Tokenization, and Why Does It Matter?

Asset tokenization involves representing ownership rights in an asset through digital tokens recorded on a blockchain or another digital ledger. Depending on the legal and technological structure, these tokens may represent interests in assets such as property, gold or financial instruments.

For Pakistan, tokenization could offer new ways to make certain investments more accessible and improve the transfer and settlement of financial assets.

For example, a properly structured property-tokenization project could allow investors to purchase fractional interests in a property rather than having to finance the entire asset themselves. Similarly, digital bonds could potentially simplify the issuance, transfer and administration of certain debt instruments.

Nevertheless, these benefits would depend on clear ownership rights, enforceable contracts, reliable technology and effective investor safeguards. Tokenization does not automatically make an investment safe, liquid or profitable.

Regulatory Sandbox to Test New Financial Products

PVARA has also introduced a regulatory sandbox covering areas such as gold, real estate and remittances. A regulatory sandbox provides a controlled environment in which eligible businesses can test innovative products under regulatory supervision.

This approach may help authorities understand how emerging technologies perform in real-world conditions before considering wider adoption.

For Pakistan, possible applications include digital representations of gold holdings, technology-enabled property investments and improved cross-border remittance services. If implemented effectively, such solutions could help businesses test new models while allowing regulators to identify operational, legal and financial risks at an early stage.

Could AI Transform Pakistan’s Financial Services?

Artificial intelligence is another area being explored as Pakistan looks to strengthen its financial infrastructure. AI-powered tools can potentially support transaction monitoring, fraud detection, compliance checks, customer service and financial risk analysis.

Combining these technologies with a well-regulated digital asset market could help financial institutions improve operational efficiency. However, successful adoption would require strong cybersecurity, responsible data management, transparent decision-making and adequate oversight.

What Does This Mean for Pakistan’s Economy?

The growing interest from virtual asset companies presents a potential opportunity for Pakistan to attract investment, encourage financial innovation and develop new technology-driven businesses.

A well-regulated market could create opportunities for fintech companies, software developers, financial institutions and businesses involved in digital asset services. It could also support the development of new investment products and potentially improve access to capital for businesses.

PVARA has indicated that licensing will be a key priority, while the economic benefits of the sector are expected to become more visible in 2027. These outcomes, however, will depend on the pace of implementation, the quality of regulation, investor confidence and actual market adoption.

The authorities will also need to address risks such as fraud, money laundering, cyberattacks, market manipulation and misleading investment schemes. A strong regulatory framework will be essential to ensure that innovation does not come at the expense of financial stability or consumer protection.

Conclusion

Pakistan’s discussions with the World Bank Group signal a growing interest in digital financial innovation, including asset tokenization, digital bonds and AI-enabled financial operations. At the same time, the 75 reported licensing applications suggest that domestic and international businesses are exploring the country’s virtual asset market.

The next major challenge will be turning these developments into a transparent, secure and commercially sustainable financial ecosystem. With effective regulation, institutional cooperation and responsible adoption of technology, Pakistan could create new opportunities for investment and modernize parts of its financial sector.

While the long-term economic impact remains to be seen, the country’s evolving regulatory approach could mark an important step towards a more digitally enabled financial future.

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Pakistan may attract fresh Chinese investment as Shengtang Group has expressed interest in signing a $10 million memorandum of understanding (MoU) to explore business opportunities in seven important sectors of the country. The proposed investment could support industrial growth, infrastructure development, energy projects, and other areas linked to Pakistan’s economic progress.

According to a statement from Pakistan’s Ministry of Industries and Production, representatives of the Chinese company discussed potential investment opportunities during a meeting with Haroon Akhtar Khan, Adviser to the Prime Minister on Industries and Production.

Seven Sectors Under Consideration

Shengtang Group has shown interest in exploring opportunities across a range of industries that could contribute to Pakistan’s economic development. The sectors under consideration include:

• Industrial development: Expanding industrial activities and supporting local manufacturing.
• Infrastructure: Exploring projects that could improve facilities and support economic connectivity.
• Tourism: Identifying opportunities to develop tourism-related businesses and services.
• Electric vehicles (EVs): Exploring investment in the growing electric mobility sector.
• Railways: Considering opportunities to support railway development and transportation infrastructure.
• Energy: Looking into projects that could contribute to the country’s energy sector.
• Urban development: Exploring initiatives related to urban infrastructure and city development.

Investment across these sectors could create opportunities for collaboration between Pakistani businesses and Chinese investors. However, the projects, funding arrangements, and implementation timelines have yet to be confirmed.

Pakistan Highlights Reforms to Attract Chinese Investors

During the meeting, Haroon Akhtar Khan highlighted the government’s efforts to improve the business environment and make investment procedures more convenient for foreign companies.

He said the government was introducing business-friendly regulatory changes and had issued instructions to relevant authorities to facilitate Chinese investors. The measures are intended to improve the ease of doing business and encourage greater participation from international companies.

The adviser also discussed the land-lease model, which offers a potential mechanism for investors seeking land for industrial and commercial development. Such arrangements could help businesses explore opportunities without necessarily purchasing land outright, depending on the applicable terms and conditions.

Stronger Economic Cooperation Between Pakistan and China

Pakistan and China have maintained close economic ties, with cooperation extending across infrastructure, industrial development, energy, and other areas. The proposed interest from Shengtang Group represents another potential opportunity to expand commercial engagement between the two countries.

Khan emphasized the government’s intention to translate Prime Minister Shehbaz Sharif’s vision for stronger relations with China into practical economic outcomes.

He also stated that around 40% of joint ventures and memorandums of understanding signed between Pakistan and China had moved into the implementation stage. This figure was cited by the adviser during the meeting and points to the government’s stated focus on advancing bilateral initiatives beyond the agreement stage.

Potential Benefits for Pakistan’s Economy

If the proposed investment progresses into concrete projects, it could offer several potential benefits for Pakistan.

Employment opportunities: Industrial and infrastructure projects may generate jobs during construction, operations, and supporting business activities.

Technology transfer: Cooperation with Chinese companies could create opportunities for Pakistani businesses to gain access to new technologies, technical expertise, and industrial processes.

Industrial expansion: New investment could help strengthen manufacturing capacity, encourage local production, and support related supply chains.

Development of emerging industries: Interest in electric vehicles could open further opportunities in vehicle assembly, charging infrastructure, and associated services, depending on the projects eventually pursued.

Greater foreign investment: Progress on the proposed MoU could encourage other international investors to examine opportunities in Pakistan.

These outcomes will depend on the scale of the projects, the financing arrangements, regulatory approvals, and the extent to which the proposed initiatives move forward.

What Happens Next?

Although Shengtang Group has expressed interest in a $10 million MoU, the proposal should not yet be treated as a completed investment. Further details about the agreement, the allocation of funds across the seven sectors, and the schedule for implementation would be needed to assess its likely economic impact.

The next important step will be to determine whether the parties formalize the proposed agreement and develop specific projects from the discussions.

For Pakistan, converting investment interest into operational businesses and completed projects remains essential to achieving lasting economic benefits. Effective implementation, a predictable regulatory environment, and coordination between investors and government institutions will be important factors in this process.

Conclusion

Shengtang Group’s interest in a proposed $10 million MoU signals a potential new avenue for economic cooperation between Pakistan and China. With opportunities spanning industry, infrastructure, tourism, electric vehicles, railways, energy, and urban development, the discussions cover several areas relevant to Pakistan’s development priorities.

While the proposal is still at the expression-of-interest stage, successful negotiations and project implementation could create opportunities for employment, technology transfer, industrial growth, and stronger commercial ties. The actual benefits will become clearer as further details emerge and the proposed investment moves, if it does, toward implementation.

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Pakistan is aiming for economic growth of more than 4% in the current fiscal year as the government steps up efforts to attract private investment, sell state-owned entities and strengthen the country’s financial position. Finance Minister Muhammad Aurangzeb has also confirmed that discussions with the United States are continuing over a proposed $10 billion exchange stabilization facility.

The government’s plans come at a time when Pakistan faces economic challenges linked to rising international oil prices, regional tensions and its dependence on external financing. Despite these pressures, the finance minister remains optimistic about the country’s economic outlook.

Pakistan Remains Optimistic About Economic Growth

According to Aurangzeb, Pakistan’s economy is expected to expand by more than 4% during the current fiscal year. He pointed to the performance of key sectors, particularly agriculture, and the country’s ability to maintain sufficient fuel supplies despite uncertainty in international energy markets.

However, higher oil prices remain a concern because Pakistan relies heavily on imported energy. An extended conflict in the Middle East could increase import costs, push inflation higher and create additional pressure on the country’s foreign exchange reserves.

The government is therefore keeping a close watch on commodity prices and their potential impact on the wider economy.

Government Plans to Raise More Than $1 Billion Through Privatization

Privatization is expected to play an important role in Pakistan’s economic reform strategy. The finance minister said the government intends to complete the privatization of five or six entities during the current fiscal year, potentially generating more than $1 billion.

Around a dozen entities are reportedly in the pipeline, including state-owned electricity distribution companies and plans to outsource airport operations.

The initiative follows the privatization of Pakistan International Airlines, which marked a significant step in the government’s efforts to reduce the state’s involvement in commercial activities.

The government believes that greater private-sector participation could improve operational efficiency, attract investment and reduce the financial burden associated with underperforming public enterprises.

Privatization is also an important part of Pakistan’s commitments under its International Monetary Fund (IMF) programmed. Progress on these reforms will be closely watched by international lenders and investors.

Pakistan Continues Talks With the United States

Alongside its privatization plans, Pakistan is pursuing additional financial support through negotiations with the United States over a proposed $10 billion exchange stabilization facility.

Aurangzeb said discussions were ongoing but did not provide a timeline for a possible agreement. He also indicated that the proposed arrangement would complement other engagements with US financial institutions, including the Export-Import Bank of the United States and the US International Development Finance Corporation.

If finalized, the facility could provide another potential source of financial support for Pakistan. However, the proposal remains under discussion and should not be considered secured funding.

The finance minister also stressed that Pakistan would continue to seek access to international markets even if the proposed facility does not materialize.

IMF Support Remains Important for Economic Stability

Pakistan’s economic recovery has been supported by a $7 billion IMF programmed approved in 2024. The programmed includes economic reforms aimed at improving tax collection, strengthening public finances and addressing structural weaknesses.

More recently, Pakistan reached a staff-level agreement with the IMF that could unlock approximately $1.21 billion in additional financing under its existing programmed and a climate-related funding arrangement, subject to the required approvals.

Continued IMF support is significant for Pakistan because the country needs foreign currency to meet external debt obligations, maintain adequate reserves and manage its balance of payments.

At the same time, the reforms associated with international lending can create difficulties for businesses and households, particularly when higher taxes and rising prices affect purchasing power.

Inflation and Oil Prices Remain Key Concerns

While the government expects economic growth to exceed 4%, inflation remains a major risk. Pakistan’s reliance on imported energy means that increases in global oil prices can raise transportation expenses, production costs and the cost of delivering goods to consumers.

These pressures could affect household budgets and businesses across several sectors.

The government will need to balance its growth ambitions with measures that maintain price stability and protect economic recovery. Stronger agricultural output and reliable fuel availability could help, but the broader outlook will also depend on international market conditions.

Private Investment Could Shape Pakistan’s Economic Future

The government’s push to privatize public-sector enterprises reflects its intention to give private businesses a greater role in economic activity.

Successful transactions could generate revenue, reduce financial risks for the government and encourage investment in sectors that require operational improvements. However, the final impact will depend on whether the planned transactions are completed successfully and whether new owners can improve efficiency and service delivery.

Investors will also be watching Pakistan’s progress on economic reforms, fiscal management and external financing.

Conclusion

Pakistan is entering the current fiscal year with a growth target above 4%, plans to generate more than $1 billion through privatization and ongoing discussions over a proposed $10 billion financial facility with the United States.

These initiatives highlight the government’s efforts to strengthen economic stability and attract greater private-sector participation. Nevertheless, high energy costs, inflation risks and dependence on external financing remain significant challenges.

The country’s economic performance will ultimately depend on its ability to implement reforms, maintain financial stability and translate announced targets into measurable results. Progress on privatization, continued engagement with international lenders and effective management of inflation will be important factors in determining whether Pakistan can sustain its recovery.

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The World Bank has proposed $200 million in financing to help Khyber Pakhtunkhwa (KP) strengthen its revenue collection system, improve public services and manage its finances more effectively. The initiative aims to nearly double the province’s own-source tax revenue in real terms, increasing it from Rs64 billion to Rs122 billion by June 2031.

The proposed initiative, titled the Pakistan Public Resources for Inclusive Development Multiphase Programmatic Approach for KP, carries a total estimated cost of $650 million. Of this amount, $200 million would come from the World Bank, while the provincial government would contribute the remaining $450 million.

According to the programmed document, the initiative is expected to cover FY2027 to FY2032, with approval scheduled for October 29, 2026.

Expanding KP’s Tax Base

A major objective of the proposed programmed is to reduce KP’s reliance on financial transfers from the federal government by increasing revenue generated within the province.

The province’s own tax receipts currently account for a relatively small and declining portion of its expenditure. At the same time, growing salary and pension obligations, inflation and additional spending requirements in the merged districts have placed considerable pressure on public finances.

To address these challenges, the proposed reforms will focus on expanding the tax base, simplifying tax procedures and improving the efficiency of revenue collection. Digital systems are also planned for the KP Revenue Authority, the Excise, Taxation and Narcotics Control Department, and the Board of Revenue.

The World Bank has identified weaknesses in property taxation, agricultural income taxation and the taxation of certain services as areas requiring attention. Fragmented administrative arrangements and limited information sharing between government departments have also restricted the province’s ability to collect revenue effectively.

Improving Healthcare and Education

Alongside tax reforms, the programmed seeks to improve how public funds are allocated and spent, particularly in the health and education sectors.

The proposed measures include better budgeting, more efficient procurement procedures and stronger financial management systems. These changes are intended to ensure that government resources are used more effectively and that essential services reach the people who need them.

By June 2031, the initiative aims to bring 60% of primary schools that currently fail to meet minimum functional standards into compliance.

It also seeks to introduce electronic verification and payment systems for 60% of contractual payments. In addition, the programmed targets a 15% reduction in procurement cycle times in healthcare and primary education.

If implemented effectively, these measures could improve transparency, reduce administrative delays and help public institutions deliver services more efficiently.

Addressing Major Social Challenges

The proposed reforms come at a time when KP continues to face significant challenges related to poverty, education and public health.

According to the World Bank figures cited in the programmed document, 35.3% of the province’s population lived below the national poverty line in FY2025. Approximately 40% of children under the age of five were affected by stunting, highlighting persistent nutritional and healthcare concerns.

Education indicators also remain troubling. Around 36% of school-age children were out of school, while only 58% of children were fully immunized.

These figures underline the importance of strengthening public institutions and directing government spending towards essential services. Although higher tax revenue alone will not resolve these problems, improved fiscal management could provide the provincial government with greater capacity to finance development priorities.

A New Digital Hub for Better Planning

Another important component of the initiative is the establishment of a KP Development Data Hub.

The proposed platform would help consolidate economic information, connect administrative records and improve access to reliable government data. Better information could enable policymakers to identify service delivery gaps, monitor public spending and make decisions based on evidence rather than incomplete records.

Digital reforms, however, will need to be accompanied by appropriate safeguards. The World Bank has classified the programmer’s environmental and social risks as moderate, identifying concerns that include digital exclusion, data privacy and the potential distributional effects of agricultural income tax reforms.

Ensuring that digital services remain accessible and that tax changes are implemented fairly will therefore be important aspects of the programmed.

Financing Structure and Implementation Timeline

The proposed $200 million World Bank contribution would consist of a $100 million International Development Association (IDA) credit and a further $100 million IDA loan. The provincial government would provide an estimated $450 million towards the overall programmed cost.

The initiative is expected to run from FY2027 through FY2032, while the central tax revenue target is set for June 2031. World Bank approval is scheduled for October 29, 2026, meaning the financing remains proposed as of October 12, 2026.

The programmer’s effectiveness will ultimately depend on the implementation of its planned reforms, the strength of institutional coordination and the provincial government’s ability to maintain consistent progress towards its targets.

Conclusion

The World Bank’s proposed financing represents a significant opportunity for Khyber Pakhtunkhwa to strengthen its fiscal position and improve the delivery of essential public services.

Raising own-source tax revenue from Rs64 billion to Rs122 billion in real terms would give the province greater capacity to finance its priorities and reduce its dependence on federal transfers. At the same time, improvements in education, healthcare, procurement and digital governance could help ensure that public resources are used more productively.

However, achieving these objectives will require more than changes to tax administration. Transparent implementation, effective oversight, fair taxation and a clear focus on public service outcomes will be essential to turning the proposed investment into lasting benefits for the people of KP.

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The possibility of aircraft leasing, engine arrangements and export credit assistance was discussed as Pakistan and Britain looked for ways to address PIA’s immediate fleet requirements while keeping longer-term procurement plans in view.

The issue was raised during a meeting between Federal Minister for Commerce Jam Kamal Khan and British High Commissioner Jane Marriott at the Ministry of Commerce.

Airbus and Rolls-Royce in Focus

Aviation cooperation was among the most important subjects discussed during the meeting. British representatives shared details about engagement with Airbus and Rolls-Royce and outlined potential options that could help PIA improve its fleet.

Export credit support was also considered as a possible mechanism for facilitating aircraft-related transactions.

For PIA, leasing could provide a faster way to add aircraft to its fleet without having to wait for lengthy procurement processes. This approach could help the airline meet its immediate operational needs while it develops a broader and more sustainable fleet strategy.

The commerce minister stressed that PIA’s direct international routes provide the airline with a significant commercial advantage. However, he also emphasized that the carrier needs better reliability, modern aircraft and improved service quality to regain the confidence of passengers.

UK and Pakistan Seek Wider Economic Cooperation

The discussions were not limited to the aviation industry. Pakistan and the UK also examined ways to increase bilateral trade and attract investment in several sectors.

Healthcare, life sciences, IT, agriculture, livestock, financial services and minerals-related businesses were among the areas identified for greater cooperation.

Both countries are also looking to achieve tangible results through the next bilateral Trade Dialogue rather than limiting cooperation to policy discussions.

Britain proposed the possibility of developing a long-term investment partnership that would be non-legally binding but supported at the ministerial level. The proposed framework could cover areas such as investment, regulatory improvements, trade facilitation, workforce development and investment financing.

Livestock Sector Could Attract British Investment

Pakistan’s livestock industry was identified as an area with considerable potential for cooperation.

Jam Kamal Khan highlighted the government’s interest in increasing animal productivity, improving production methods and expanding processed and value-added meat exports.

British technology, technical expertise and investment could help Pakistan modernize its livestock industry and establish stronger links with international markets.

The British High Commissioner pointed out that improvements in food safety and regulatory compliance would also be essential. Meeting international standards would allow Pakistani livestock and food producers to access the UK and other overseas markets more effectively.

Focus on Building Pakistani Brands

Another important topic was the international marketing of Pakistani products.

The commerce minister called for greater efforts to build internationally recognized Pakistani brands instead of relying primarily on foreign companies to market locally produced goods.

Products such as pink salt, olive oil, textiles, food items and surgical instruments were identified as areas where Pakistan could potentially generate greater value through branding, quality improvement and product development.

The discussions also covered opportunities for Pakistani food companies and restaurant businesses to establish a stronger presence across the UK.

Opportunities in Islamic Finance

Pakistan and Britain also discussed financial-sector cooperation, particularly in the field of Islamic finance.

Greater collaboration could help develop stronger financial connections between Pakistan and the Pakistani community living in the United Kingdom.

Such links could support investment, business expansion and the movement of capital between the two markets.

UK Expertise Could Support Pakistan’s Minerals Industry

The minerals sector was another key area of interest.

Pakistan is seeking international technical expertise and experienced partners to improve mineral exploration and develop commercially viable projects. Joint ventures and professional services could play an important role in strengthening the country’s domestic mining capabilities.

British companies could contribute expertise in areas such as legal services, finance, insurance and other supporting fields.

The UK also showed interest in encouraging its businesses to participate in Pakistan’s upcoming minerals conference.

2027 Could Bring New Business Opportunities

The two countries also discussed plans surrounding Pakistan’s 80th anniversary in 2027.

The anniversary could be used to organize business, educational and cultural activities designed to showcase Pakistani products and highlight investment opportunities.

Such initiatives could provide Pakistani businesses with additional exposure in the UK while strengthening people-to-people and commercial ties between the two countries.

A Broader Partnership Taking Shape

The latest talks demonstrate that Pakistan-UK economic relations are expanding beyond traditional trade areas. Aviation, particularly the possible involvement of Airbus and Rolls-Royce in PIA’s fleet requirements, could become an important component of this relationship.

For PIA, leasing and potential financial support could provide a route toward addressing immediate fleet shortages. For Pakistan more broadly, cooperation with the UK could open new opportunities in technology, agriculture, healthcare, financial services and minerals.

The next challenge will be turning these discussions into specific agreements, investments and commercial projects. Both sides have indicated their intention to continue working together and prepare practical proposals for the next Trade Dialogue.

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The facility is particularly relevant to steel melters, re-rollers and composite units, which are required to declare electricity consumption through Annex-K of their sales tax returns.

New solution for delayed electricity data

Under the existing sales tax framework, electricity consumption data for steel units is generally transferred automatically to Annex-K after the relevant electricity distribution company submits its Annex-C information.

However, delays or omissions by distribution companies can create problems for steel manufacturers. Without the required electricity consumption figures, taxpayers may face difficulties in completing Annex-K and determining their correct sales tax liability.

To address this issue, the FBR has developed an online approval facility that allows taxpayers to seek inclusion of their electricity units when the normal automated process has not provided the data.

How the new mechanism works

Steel manufacturers facing this issue can submit an application through the IRIS system to their respective Chief Commissioner of Inland Revenue.

The application must be supported by the relevant electricity bills and other required information. The Chief Commissioner will review and verify the documents before approving the electricity consumption figures.

Once the application is approved, the authorized electricity units will be entered into the system and will subsequently appear automatically in the taxpayer’s Annex-K.

Importance of Annex-K for steel manufacturers

The filing of Annex-K is a mandatory requirement for steel melters, re-rollers and composite units under the 13th Schedule of the Sales Tax Act, 1990.

Electricity consumption is an important component in determining the sales tax liability of these businesses. Consequently, missing or delayed electricity data can potentially disrupt the return-filing process.

The new facility is therefore intended to prevent taxpayers from being penalized or delayed because of reporting issues attributable to electricity distribution companies.

Taxpayers can avoid waiting for DISCO returns

Previously, a steel manufacturer could be left waiting for the relevant distribution company to submit its return before the electricity consumption data became available in Annex-K.

With the new arrangement, taxpayers have a formal route to request the required electricity units directly through the tax authority’s online system.

This should make the sales tax filing process more efficient and allow eligible steel manufacturers to complete their returns within the prescribed deadlines.

FBR directs field offices to process applications

The FBR has instructed Chief Commissioners of Inland Revenue to deal with these applications within the applicable statutory time limits. It has also directed its field formations to make use of the newly introduced online facility.

The measure effectively places greater responsibility on tax offices to verify genuine electricity consumption claims where the automated data-sharing mechanism between taxpayers and distribution companies does not work as intended.

What steel manufacturers should do

Eligible taxpayers whose electricity consumption is missing from Annex-K should:

1. Check their electricity bills and consumption records.
2. Confirm that the relevant units have not been reported through the normal automated process.
3. Submit the required application through IRIS within the applicable statutory period.
4. Provide the necessary electricity bills and supporting information.
5. Obtain approval from the concerned Chief Commissioner.
6. Verify that the approved consumption figures appear in Annex-K before completing the sales tax return.

Conclusion

The FBR’s new online facility is aimed at resolving a practical problem faced by steel manufacturers when electricity distribution companies fail to report consumption data or submit their returns late.

By allowing verified electricity consumption to be approved through the IRIS system, the FBR has provided steel melters, re-rollers and composite units with a mechanism to complete their Annex-K requirements without unnecessarily waiting for delayed DISCO reporting.

The initiative is expected to make sales tax compliance smoother for the steel sector while ensuring that electricity consumption used for calculating tax liability is supported by verified documentation.

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Under the proposed arrangement, the Head of the DMO will play a central role in shaping the government’s borrowing strategy, managing financial risks and ensuring that debt policies remain aligned with broader economic and fiscal objectives.

A major responsibility of the new DMO leadership will be the implementation of the Medium-Term Debt Management Strategy (MTDS) and the Annual Borrowing Plan (ABP). These plans will be carried out in line with the requirements of the Fiscal Responsibility and Debt Limitation (FRDL) Act, 2025.

Greater Focus on Borrowing and Debt Risks

The strengthened DMO will oversee both domestic and international borrowing programmes. This will include decisions about when and where the government should access financial markets, as well as which financing instruments are most appropriate.

The objective will be to balance borrowing costs against potential risks. This is particularly important as changes in interest rates, exchange rates and market conditions can significantly affect the government’s debt-servicing burden.

The DMO will also monitor key risks associated with refinancing, interest rates and contingent liabilities. A more structured risk-management framework could help the government anticipate potential pressures before they become major fiscal challenges.

Diversifying Sources of Government Financing

Another important aspect of the reform is the planned diversification of government funding.

Rather than relying heavily on a limited number of borrowing channels, the DMO is expected to explore a broader mix of domestic and external debt instruments. The choice of financing would be guided by considerations such as cost, maturity, market conditions and associated risks.

Greater diversification could give the government more flexibility when domestic or international financial conditions become difficult.

Stronger Coordination with Financial Institutions

The Head of the DMO will also serve as a key point of coordination between the government and major financial institutions and stakeholders.

This will include engagement with the Finance Secretary, State Bank of Pakistan, Economic Affairs Division, International Monetary Fund, development partners, investors and international credit-rating agencies.

Such coordination is particularly significant for Pakistan, where access to international financing and investor confidence can have a direct impact on the government’s ability to meet its financing requirements.

Improving Transparency and Investor Communication

The proposed changes also place greater emphasis on communication and transparency.

The DMO will be responsible for communicating government debt policies, financing plans and its position in financial markets. It will also oversee the timely publication of statutory debt reports and fiscal-risk information.

Better and more consistent communication could help investors and other stakeholders understand the government’s borrowing requirements and long-term debt strategy.

The office will further contribute to federal budget preparation, debt sustainability assessments and compliance with debt-data reporting requirements.

Building a More Professional Debt Management System

Beyond borrowing and reporting, the strengthened DMO will focus on developing its own institutional capacity.

The Head of the office will be expected to build technical expertise, improve internal controls and promote international best practices in public debt management. The DMO will also advise the government on major debt-related policy decisions under the FRDL Act, 2025.

This represents a broader shift toward treating public debt management as a specialized financial function rather than simply an administrative task.

What the Reform Could Mean for Pakistan

Pakistan’s fiscal position makes effective debt management particularly important. A large debt burden can limit the government’s room for development spending and increase vulnerability to changes in interest rates, exchange rates and global financial conditions.

A stronger and more professionally led DMO could help address some of these challenges by providing a more coordinated approach to borrowing and risk management.

The success of the initiative, however, will depend not only on the creation of a dedicated leadership position but also on the authority, expertise, data access and institutional capacity provided to the DMO.

If effectively implemented, the reform could help Pakistan move toward a more predictable, transparent and risk-conscious borrowing framework while supporting the government’s broader goals of fiscal stability and long-term debt sustainability.

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The possible revision comes as provincial governments struggle to balance social-sector spending with wider fiscal commitments. Under the current arrangements, provinces are expected to generate a combined cash surplus of Rs1.7 trillion and provide financial support to the federal government. These obligations have created additional pressure on provincial budgets.

Provinces Face a Spending Gap

Government officials have reportedly indicated that the provinces may once again fail to achieve the existing health and education spending target during FY27. Their budget allocations for the two sectors are collectively around Rs500 billion below the current IMF requirement.

Even if the IMF lowers the target to Rs3.9 trillion, provinces could still face a shortfall of approximately Rs200 billion. This means that a reduction in the target would ease some pressure but would not completely resolve the gap between required and budgeted spending.

The proposed revision is not yet final, and further discussions between the IMF and provincial authorities are expected before a decision is reached.

Punjab and Sindh Highlight Fiscal Constraints

Punjab and Sindh have reportedly raised concerns about their ability to maintain higher spending on health and education while meeting their commitments to support the federal government’s fiscal position.

For FY27, Punjab has allocated around Rs1.3 trillion for health and education from its provincial budget of approximately Rs5.9 trillion. Sindh has set aside about Rs1.1 trillion for the two sectors, while Khyber-Pakhtunkhwa has allocated more than Rs800 billion. Balochistan’s combined allocation stands at around Rs268 billion.

Khyber-Pakhtunkhwa, which has not committed to providing grants to the federal government in the same way, has reportedly assured the IMF that it will meet its health and education spending commitment.

Why the IMF Target Matters

Health and education spending is currently classified as an indicative target under Pakistan’s $7 billion IMF programmed. Although missing an indicative target does not carry the same consequences as breaching a formal performance criterion, the IMF has previously considered strengthening the requirement.

If the target were converted into a quantitative performance criterion, failure to meet it could require Pakistan to seek a waiver from the IMF Executive Board.

Pakistan has already struggled to meet the target. Combined provincial spending on health and education reportedly fell about Rs370 billion short of the IMF requirement in the previous fiscal year.

Pressure From the Wider Fiscal Adjustment

The debate over health and education spending is part of a much larger effort to stabilize Pakistan’s finances. The federal government has been relying on provincial fiscal surpluses and other measures to meet its overall fiscal targets.

Under the agreed arrangements, the federal and provincial governments are expected to provide Rs1.036 trillion in cash grants, provided the Federal Board of Revenue achieves its annual tax collection target of Rs15.263 trillion.

At the same time, development spending has also come under pressure. The federal government reduced its Public Sector Development Programmed by Rs126 billion to Rs1 trillion, while Punjab reduced its development spending allocation by Rs150 billion.

What Comes Next?

The IMF review is focused on finalizing a consensus draft of the Memorandum of Economic and Financial Policies. The outcome of the discussions will determine whether the proposed changes to provincial spending targets are accepted.

If Pakistan and the IMF reach a staff-level agreement and the review receives approval from the Fund’s Executive Board, Pakistan could unlock around $1 billion under its existing IMF programmed. The country could also receive more than $200 million through the climate financing facility.

For Pakistan’s provinces, however, the central challenge will remain the same: finding enough fiscal space to meet IMF commitments while continuing to finance essential services such as healthcare and education. Any reduction in the target could provide temporary breathing room, but provincial budgets will still have to balance social-sector needs with the country’s broader fiscal consolidation requirements.

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According to figures released by the authority, KPRA collected Rs12.66 billion in Sales Tax on Services between July and September, marking a 24% increase compared with the Rs10.2 billion collected during the same period last year.

When the Infrastructure Development Cess (IDC) is included, the authority’s total collection from the two revenue streams stood at Rs13.123 billion during the quarter.

September Records Stronger Tax Collection

The upward trend was particularly visible in September. KPRA’s Sales Tax on Services revenue reached Rs4.65 billion during the month, registering a year-on-year increase of 35%.

The figures indicate that the authority has been able to strengthen its core revenue collection despite challenges affecting some other sources of income.

KPRA’s performance also highlights the growing contribution of services-related taxation to the provincial revenue base. Better collection mechanisms, greater taxpayer participation and continued administrative efforts appear to have contributed to the improvement.

Border Closures Affect Infrastructure Cess

While sales tax revenue posted healthy growth, collections from the Infrastructure Development Cess faced pressure during the quarter.

KPRA collected approximately Rs457 million through the IDC between July and September. The authority attributed the weaker performance in this area to the closure of Pakistan-Afghanistan border crossings.

The disruption affected cross-border commercial activity, ultimately reducing the volume of trade on which the infrastructure cess is collected.

KPRA Credits Revenue Growth to Reform Efforts

KPRA Director General Irum Naz welcomed the increase in the authority’s core tax receipts and credited the performance to the efforts of KPRA’s officers and officials.

She also acknowledged the support of Khyber Pakhtunkhwa Chief Minister Muhammad Sohail Afridi and Adviser to the Chief Minister on Finance Muzzammil Aslam for their role in strengthening the authority and supporting ongoing revenue reforms.

The authority has also emphasized the importance of cooperation from taxpayers. According to KPRA, voluntary compliance remains a key element in improving revenue collection and building a more effective tax system.

A Positive Start to FY27

The first-quarter figures provide an encouraging start to KPRA’s revenue performance for FY27. A 24% rise in Sales Tax on Services collection suggests that the authority is making progress in expanding its tax base and improving collection efficiency.

However, the decline in infrastructure cess receipts demonstrates how external factors, particularly disruptions to regional trade, can affect provincial revenue streams.

Going forward, maintaining the momentum in STS collection while addressing challenges affecting other revenue sources will be important for KPRA as it seeks to strengthen Khyber Pakhtunkhwa’s fiscal position.

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The changes are aimed at maintaining the special tax treatment available to eligible steel businesses in these areas while setting different rates according to the type of manufacturing activity and the source of raw materials.

The revised rates have been notified through SRO 1664(I)/2026, which amends the earlier SRO 1245(I)/2026.

Different Rates for Steel Manufacturers

Under the updated arrangement, steel re-rolling units producing steel bars will generally be subject to sales tax of Rs30 per electricity unit consumed. However, re-rollers operating in the former FATA and PATA will continue to benefit from a reduced rate of Rs20 per electricity unit, regardless of whether they use imported or locally sourced raw materials.

For steel melters and composite manufacturing units located in these areas, the sales tax rate has been fixed at Rs20 per electricity unit when they use locally sourced remeltable steel scrap.

This arrangement continues the preferential tax treatment available to qualifying businesses in the former FATA and PATA under the relevant provisions of the Sales Tax Act, 1990.

Rs5 Per Unit Rate for Qualifying Units

One of the most significant features of the revised framework is the Rs5 per electricity unit sales tax rate available to certain qualifying steel units.

To qualify, more than 70% of the aggregate raw material used by the unit during the preceding 12 months must consist of imported material or remeltable steel scrap purchased directly from persons registered under the Export Facilitation Scheme (EFS).

This condition is intended to distinguish units that substantially rely on imported or qualifying EFS-linked raw materials from those primarily using other sources.

Special Rule for New and Restarting Businesses

The FBR has also established a separate mechanism for newly established steel businesses and units that resume production after being closed.

Because such businesses may not have a complete 12-month operating history, their eligibility for the Rs5 per-unit rate will be determined using their quarterly imports or purchases.

This provides a separate basis for assessing newly established or reactivated manufacturing units instead of applying the normal 12-month calculation immediately.

What the Changes Mean for the Steel Sector

The revised structure creates different electricity-based sales tax obligations depending on the nature of the steel operation, its location and the source of its raw materials.

For qualifying manufacturers, particularly those meeting the 70% imported or EFS-sourced raw-material requirement, the Rs5-per-unit rate could substantially reduce the electricity-linked tax burden compared with the higher rates applicable to other categories.

At the same time, the continued Rs20-per-unit concession for eligible steel manufacturers and re-rollers in the former FATA and PATA preserves the special tax treatment historically available to businesses operating in these territories.

Conclusion

The FBR’s latest notification provides a more clearly differentiated sales tax structure for steel manufacturers. While standard re-rolling operations can face rates of up to Rs30 per electricity unit, eligible businesses in the former FATA and PATA can benefit from reduced rates, including Rs20 per unit for specified operations and Rs5 per unit for units meeting the prescribed raw-material criteria.

Steel manufacturers will therefore need to closely monitor their raw-material sourcing and maintain appropriate purchase and import records to establish eligibility for the applicable concession.

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Under the proposed amendments, the maximum limit for microfinance and housing loans would increase to Rs5 million. The move is part of a broader effort to update financing rules and make credit facilities available to a wider segment of borrowers.

Higher Income Limit for Microfinance Borrowers

The proposed changes would also increase the income threshold for people eligible to obtain microfinance loans.

Currently, borrowers with an annual income of up to Rs1.2 million fall within the relevant limit. SECP has proposed raising this threshold to Rs1.5 million per year.

The adjustment could allow more individuals to qualify for microfinance facilities, particularly as household incomes and financing requirements change over time.

Major Expansion in SME Turnover Limits

One of the most notable aspects of the proposed amendments is the revision of turnover limits used to classify small and medium-sized enterprises (SMEs).

Under the proposed framework, businesses with annual turnover of up to Rs400 million would be classified within the small-enterprise threshold. This represents a substantial increase from the existing ceiling of Rs30 million.

The turnover limit for medium-sized enterprises would also be raised. The proposed ceiling would increase from Rs800 million to Rs2 billion.

These changes would bring a much larger number of businesses within the SME classification framework.

Alignment With State Bank Revisions

According to the SECP, the proposed turnover thresholds have been aligned with recent changes introduced by the State Bank of Pakistan (SBP).

The alignment is intended to create greater consistency in the regulatory treatment of businesses and financing activities across the financial sector.

With the revised thresholds, businesses that previously exceeded the SME turnover limits could potentially fall within the updated categories and gain access to financing arrangements available under the applicable regulatory framework.

Changes Are Still Under Consultation

It is important to note that the proposed amendments have not yet become final regulations.

The SECP has invited stakeholders and other interested parties to submit their comments and recommendations on the proposed changes. The final framework could therefore be modified after the consultation process.

If approved in their proposed form, the amendments would represent a considerable expansion of the existing financing and SME classification framework.

What the Proposed Changes Could Mean

The proposed increase in loan limits could provide borrowers with access to larger amounts of financing, while the higher income threshold could broaden eligibility for microfinance products.

For businesses, the significantly higher turnover ceilings could bring many more enterprises within the SME framework. This may be particularly relevant for companies that have grown beyond the existing turnover limits but remain relatively small compared with larger corporations.

Overall, the proposals reflect an effort by the SECP to update its financing regulations in line with changing economic conditions and recent regulatory developments. However, stakeholders will need to wait for the completion of the consultation process and the SECP’s final decision before the proposed limits take effect.

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At the center of the disagreement is Pakistan’s three-month fuel compensation programmed for motorcyclists and owners of small cars. The government has estimated that the initiative will cost around Rs75 billion. IMF officials, however, are reportedly concerned that the actual expense could be considerably higher.

For Islamabad, ending the programmed before its scheduled completion could put additional pressure on consumers already dealing with expensive fuel. The government therefore appears reluctant to withdraw the relief early, although extending it beyond the original three-month period could become difficult.

The Bigger Problem: Gas-Sector Debt

Fuel subsidies are only one part of the disagreement. Pakistan is also trying to find a way to deal with approximately Rs3.6 trillion in gas-sector circular debt.

The government has proposed a complicated settlement involving tariff differential claims and payments among state-owned energy companies. The plan also involves dividends from companies such as OGDC, PPL and GHPL. Officials argue that the accumulated debt is partly the result of government policies and public-service obligations that prevented gas distribution companies from recovering their full costs.

The IMF, however, is questioning whether the proposed arrangement would actually improve Pakistan’s fiscal position. It has also raised concerns about the proposed treatment of gas-company receivables and delayed-payment charges, including amounts running into hundreds of billions of rupees.

Why Fuel Prices Are a Major Issue

The government has told the IMF that consumers are already paying a substantial amount for petrol. According to figures presented by the Petroleum Division, the imported cost of petrol before taxes and commercial margins was around Rs250 per liter, while the price paid by consumers was approximately Rs390.

A significant portion of the difference comes from taxes and margins. The Petroleum Division has therefore argued that high fuel prices are putting considerable pressure on households and that some form of relief is justified.

The IMF’s position is different. Rather than relying on broad-based or cross-subsidies, it wants Pakistan to use targeted assistance aimed specifically at people who need support. The lender has also reiterated its expectation that Pakistan avoid introducing new fuel subsidy mechanisms.

A Difficult Balancing Act

The disagreement highlights a broader challenge for Pakistan: how to protect consumers without worsening the government’s already difficult fiscal position.

On one side, high energy prices create pressure on households and businesses. On the other, subsidies and the accumulation of unpaid energy-sector liabilities can create additional financial problems for the government.

Pakistan is therefore attempting to restructure the energy sector while maintaining some immediate relief for consumers. The IMF, meanwhile, is seeking stronger controls over public finances and greater transparency in the way energy-sector liabilities are handled.

The two sides have already held several meetings on these issues, but important differences remain. The government has also formed a committee to pursue structural reforms in the petroleum sector.

The outcome of these negotiations will matter beyond the immediate fuel-compensation programmed. How Pakistan resolves its energy-sector debts and subsidy policies could have a lasting impact on public finances, energy companies and consumers alike.

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According to officials familiar with the discussions, the FBR briefed the IMF delegation on the country’s tax collection performance and explained the factors responsible for the shortfall recorded during August.

The tax authority collected its targeted revenue in July but remained approximately Rs28 billion below its August target. Despite this gap, FBR officials told the IMF that September collections are expected to make up the difference.

The FBR has set a September collection target of Rs1.330 trillion and expects to achieve the amount. Officials believe that meeting the September target will allow the revenue authority to reach its overall first-quarter commitment of Rs3.053 trillion.

Income Tax Returns Show Stronger Filing Activity

The number of income tax returns submitted for Tax Year 2026 was another key issue discussed during the IMF talks.

FBR officials informed the delegation that approximately 4.7 million income tax returns had been filed so far. During the corresponding period last year, the number stood at around 3.2 million.

This represents an increase of approximately 1.52 million returns, indicating a substantial rise in filing activity compared with the previous year.

The legal deadline for filing income tax returns is September 30, 2026. The FBR is expected to review the number of returns received before deciding whether taxpayers should be granted additional time.

Officials have indicated that an extension could be considered if filing trends and requests from taxpayers and other stakeholders justify such a move. However, any extension would only become effective after an official announcement from the FBR.

Civil Servants Face New Asset Disclosure Requirements

The IMF discussions also covered Pakistan’s efforts to strengthen financial disclosure requirements for government employees.

Officials briefed the IMF on legislation introduced to establish a framework for monitoring the financial affairs of civil servants. A new Section 15-A of the Civil Servants Act provides the legal basis for regulating and monitoring the financial conduct of public servants.

Under the new arrangements, federal civil servants in grades 17 to 22 will be required to submit their asset declarations electronically by October 30, 2026.

The framework also provides for public disclosure of assets belonging to officers in these grades, while certain restricted information is scheduled to be made public by December 31, 2026, in accordance with the timeline agreed with the IMF.

The Establishment Division secretary has briefed the IMF delegation on the legal and administrative steps being taken to put the new disclosure system into operation.

Auto Policy and Tariff Reforms Also Under Discussion

Pakistan’s broader economic reform agenda also remains part of its engagement with the IMF.

Officials are expected to brief the Fund on the proposed five-year automotive policy, which is aimed at shaping the direction of the country’s automobile sector.

The Ministry of Commerce is also expected to discuss the National Tariff Policy, along with changes made to import and export regulations.

These discussions form part of Pakistan’s wider engagement with the IMF as the government works to meet its revenue commitments and implement structural reforms.

Outlook

For the FBR, September will be particularly important. Although the revenue authority missed its August target, it maintains that stronger collections during September will enable it to close the first quarter at the committed level of Rs3.053 trillion.

At the same time, the sharp rise in tax-return filings and the implementation of new asset-declaration rules represent important developments in Pakistan’s tax and public-sector administration.

The final first-quarter revenue figures, along with any decision regarding an extension of the tax-return deadline, will provide a clearer picture of whether the FBR has delivered on the commitments communicated to the IMF.

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The two companies have signed a Memorandum of Understanding (MoU) to examine investment opportunities worth approximately Rs20 billion in Pakistan’s gas and upstream energy industry over the next three to five years.

Focus on Gas Development and Monetization

The proposed partnership will explore several areas of the energy value chain, including upstream gas development, field expansion, gas processing, production improvement and the sale of gas to third-party buyers.

A key area of interest will be the development of stranded and low-pressure gas resources. Such resources can be challenging to commercialize because of technical and economic constraints. The companies intend to examine ways of using modern technology and processing solutions to convert these resources into commercially usable gas.

The partnership also comes at a time when Pakistan’s regulatory framework is creating new opportunities for gas producers.

New Opportunities for Third-Party Gas Sales

Recent changes to the Petroleum (Exploration & Production) Policy 2012 have allowed exploration and production companies to sell up to 35% of their pipeline-quality gas to licensed third-party buyers through a competitive process.

This regulatory development could provide additional opportunities for companies seeking to process, transport and market gas outside traditional arrangements.

For Shaheen Energy, the new framework could complement its existing involvement in gas processing and third-party gas sales. The company has been working with exploration and production companies to develop solutions for processing and commercializing natural and flare gas.

Shaheen Energy’s Processing Capabilities

Shaheen Energy already operates a gas-processing facility at the Sinjhoro field, with a designed capacity of around 10 million standard cubic feet per day (MMSCFD).

The facility currently handles approximately 8–10 MMSCFD of low-pressure permeate gas. Its membrane-based technology is designed to remove carbon dioxide and improve the quality of the gas so that it can meet pipeline requirements.

This existing infrastructure gives Shaheen experience in dealing with gas that might otherwise be difficult to bring into the commercial market.

Anton to Bring International Oilfield Expertise

China-based Anton Oilfield Services Group will contribute its international experience and technical capabilities to the proposed cooperation.

The company provides a range of oilfield services, including drilling and completion, reservoir engineering, production enhancement, field management and energy-resource commercialization. Its operations extend across more than 30 countries and regions.

Through the partnership, Anton’s technical expertise could be combined with Shaheen Energy’s local knowledge, processing facilities and experience in Pakistan’s gas market.

Potential Impact on Pakistan’s Energy Sector

Pakistan continues to face challenges related to energy supply, domestic gas availability and the utilization of existing resources. Developing low-pressure and stranded gas could provide an additional source of commercially usable energy if projects prove technically and financially viable.

The proposed cooperation also highlights the growing role of technology in Pakistan’s upstream energy industry. Advanced processing and production-enhancement techniques can potentially help companies extract greater value from existing fields.

However, the Rs20 billion figure represents investment opportunities that the two companies intend to explore under the MoU; it should not be interpreted as a confirmed investment commitment at this stage. Specific projects would still need to undergo commercial, technical, regulatory and financing assessments.

Looking Ahead

The Shaheen Energy–Anton partnership reflects an effort to combine local expertise with international oilfield technology to identify new opportunities in Pakistan’s gas sector.

Over the proposed three-to-five-year period, the companies will assess projects ranging from gas processing and production enhancement to field development and third-party gas sales.

If commercially viable projects emerge from the cooperation, the initiative could contribute to the broader effort to monetize underutilized gas resources and strengthen Pakistan’s domestic energy infrastructure.

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