In a landmark move aimed at revitalizing Pakistan’s struggling industrial sector, the government has finalized a long-term industrial policy featuring 10-year loans with a two-year grace period, along with major tax incentives and structural reforms. The announcement was made following a high-level meeting of the Prime Minister’s Committee on Industrial Policy, chaired by Special Assistant to the Prime Minister on Industries and Production, Haroon Akhtar Khan.
The proposed policy lays out a comprehensive strategy to support industrial units, particularly those struggling with non-performing loans and financial distress. One of the flagship initiatives includes long-term financing for up to a decade, tailored interest rates, and restructuring mechanisms to breathe new life into dormant or underperforming units.
To stimulate investment and industrial expansion, the policy recommends a phased reduction in corporate tax from 29% to 26% over the next three years. It also calls for crucial amendments to the SECP Act, the Anti-Money Laundering Act, and the Income Tax Ordinance, aiming to create a more business-friendly and transparent regulatory environment.
Under the financing framework, borrowers will be divided into four categories based on viability, with the State Bank of Pakistan providing specific guidelines. Loans for back-ended projects will come with an optional grace period and flexible early repayment terms, while banks may provide fresh working capital up to 20% of the restructured amount.
In a move to clear the backlog of bad loans, the policy allows a haircut of up to 60% on the principal under board-approved restructuring plans. These write-offs will be recognized separately for tax purposes and qualify as deductions under Section 29 of the Income Tax Ordinance. Full and final settlements will also be permitted through lump-sum or staggered payments over a period of 12 to 24 months.
To strengthen governance and ensure transparency, third-party due diligence will be mandatory for loans up to Rs100 million. Chartered accountancy firms or certified financial institutions will conduct the due diligence, with oversight from the SBP, which will also maintain a public portal for province-wise and sector-specific progress updates.
A whistleblower channel will be introduced to report misconduct or opaque dealings, while every revived unit will be monitored for at least two years. Quarterly performance reports will be submitted to the Ministry of Industries and Production to ensure accountability and progress tracking.
Haroon Akhtar Khan highlighted the urgency of the policy, citing the decline of the industrial sector’s share in GDP from 26% in 1996 to just 18% in 2025. He emphasized that reviving domestic manufacturing, increasing exports, and reducing import dependency are essential to economic recovery.
The recommendations stem from the work of eight expert sub-committees tasked with tackling key bottlenecks in the industrial ecosystem. These include fresh SBP guidelines for rehabilitating sick industries, enhancements to the Corporate Rehabilitation Act 2018, and directives to banks to use predictive tools for early signs of distress in industrial units.
In an aggressive follow-up to accelerate implementation, SAPM Khan also announced the formation of 10 new sub-committees, each expected to deliver actionable outputs within a week. The finalized policy has already been presented to Prime Minister Shehbaz Sharif, who reportedly commended the committee’s work and expressed strong support for swift execution.
The new industrial policy is being hailed as a potential game-changer, with the government aiming to launch what Khan described as a “new industrial revolution” in Pakistan. If implemented effectively, this policy could re-anchor manufacturing as a central pillar of the national economy, boost employment, and catalyze export-led growth.
