The government has unveiled a new five-year industrial policy targeting industrial growth, export promotion, and financial relief for businesses. The policy aims to ease the tax burden, improve liquidity, and support small and medium-sized enterprises. However, IMF oversight may delay immediate implementation.
Key Tax Measures to Boost Industry
Under the new policy, the super tax will gradually reduce from 29 percent to 26 percent. This phased 3 percent cut is expected to relieve the industrial sector by Rs 270 billion. Small and medium industries will benefit from Rs 110 billion in reduced tax liabilities.
Additionally, the 1 percent advance income tax for medium and small industries will be abolished. These measures are designed to improve cash flow and encourage industrial expansion. Experts believe these steps could create a more investor-friendly environment.
Support for Exports and Industrial Revitalisation
The policy includes initiatives to strengthen exports and revive closed industrial units. Export tariffs will gradually decrease over the next five years. Meanwhile, local taxes and withholding on imported inputs will also be reduced to give exporters financial flexibility.
A National Industrial Rehabilitation Commission will be established to oversee the revival of closed units. Commercial banks will provide loans under State Bank directives. Private sector financing is expected to increase by 20 percent.
In addition, the policy plans to fully implement energy recovery measures and upgrade electricity transmission and distribution networks. These efforts aim to ensure industries have reliable power and reduced operational costs.
IMF Oversight Remains a Key Challenge
Despite the comprehensive policy, IMF objections could slow execution. The fund has specifically opposed the 3 percent super tax reduction and other tax exemptions due to ongoing loan program conditions. Officials warn that if negotiations fail, full implementation may be delayed until 2027.
The government is actively seeking approval while emphasizing the importance of industrial growth for national economic recovery. Policymakers remain hopeful that a balance between IMF requirements and domestic economic needs can be achieved.
Outlook for Industrial Growth
If implemented successfully, the industrial policy could significantly boost Pakistan’s manufacturing sector. Increased liquidity, reduced taxes, and easier access to finance are expected to encourage investment. Exporters may gain a competitive advantage, while closed units could resume operations, generating jobs.
Overall, the policy is designed to create a long-term framework for sustainable industrial growth. However, its success largely depends on negotiations with international financial institutions.
