Investment Climate In Pakistan

Given its fragile balance of payments position and urgent need to boost industrial production, Pakistan needs to significantly increase its mobilization of foreign resources. It is crucial to accord high priority to foreign direct investment (FDI). Sections of this report include: importance of FDI in Pakistan; review of FDI policy; trends, issues, FDI, and economic impact of FDI; concentrated FDI in the power sector and its balance of payments implications; and conclusions, lessons, and policy challenges. Charts and tables.

The GoP welcomes foreign investments and offers incentives to attract new capital inflows. These incentives include tax exemptions, tariffs reductions, infrastructure, and investor facilitation services in designated special economic zones. Since 1997, Pakistan has established and maintained a largely open investment regime. The PML-N government introduced the Investment Policy 2013 that further liberalizes investment policies in most sectors. In addition to expressing concern about the deteriorating law and order situation, foreign investors continue to advocate for the Government of Pakistan to improve legal protections for foreign investments, protect intellectual property rights, and establish a clear and consistent policy of upholding contractual obligations and settlement of tax disputes.

Pakistan is working to improve its public investment management (PIM) to support economic growth and service delivery and make public infrastructure more sustainable and resilient to climate change. This assessment applies the IMF’s Public Investment Management Assessment (PIMA) framework, including the Climate-PIMA module. It highlights some of the important efforts made in recent years to strengthen PIM and identifies scope for further strengthening of key institutions. In a context where fiscal space is tight and climate action urgent, it recommends a number of targeted actions to move reforms forward.

This report provides an assessment of how governments can generate inclusive economic growth in the short term, while making progress towards climate goals to secure sustainable long-term growth. It describes the development pathways required to meet the Paris Agreement objectives.