The Special Investment Facilitation Council has urged Pakistan to undertake major structural reforms in its tax architecture, interest rate policy, and exchange-rate management to restore economic competitiveness and establish a clear long-term growth strategy. National Coordinator Lt General Sarfraz Ahmad presented these recommendations while addressing top business leaders during the second day of the Dialogue on Economy, hosted by the Pakistan Business Council. His remarks highlighted deep-rooted challenges within the economic system and called for decisive measures to break the cycle of low investment, heavy taxation, and reliance on short-term fixes.
During his address, Ahmad emphasized that Pakistan’s economic direction lacked a coherent growth plan. He cautioned that without a shift toward an export-led model, the country would continue to depend on protectionist policies and subsidies that restrict productivity and limit expansion. Describing the current fiscal approach as unsustainable, he stated that taxation had become the default tool for revenue generation, with legitimate businesses repeatedly targeted because they were already documented.
Ahmad revealed that the government was deliberating substantial changes to ease the tax burden on the corporate sector. Among the key proposals under discussion are lowering the corporate income tax from 29 percent to 25 percent, removing the super tax introduced as a temporary measure, and eliminating the inter-corporate income tax. He noted that the effective tax rate exceeds 50 percent when all obligations are combined, which discourages growth, pushes companies to split operations, and keeps the business sector from scaling. He stressed that the government has reached a consensus that the current tax system is too punitive to support sustainable economic development.
The coordinator also addressed monetary policy concerns, asserting that interest rates must reflect the country’s inflation outlook and broader economic realities. He questioned the sustainability of maintaining the policy rate at 11 percent when inflation is on a downward trajectory. According to him, elevated rates, combined with energy sector circular debt, exchange-rate volatility, and limited fiscal space, have created a prolonged period of economic strain. A more responsive and grounded monetary policy was needed, he said, to ease pressure on businesses and support investment.
On exchange-rate management, Ahmad warned against artificially sustaining the currency and instead called for a market-aligned, competitive approach that still takes national vulnerabilities into account. He argued that past attempts to maintain unrealistic exchange-rate levels have ultimately contributed to financial imbalances and market uncertainty.
Addressing the issue of weak investment flows, he pointed out that foreign direct investment remains stagnant at around 1.2 billion dollars annually. He argued that Pakistan cannot expect meaningful foreign inflows until domestic investors show confidence by reinvesting within the country. He lamented that much of Pakistan’s private capital ends up in global financial hubs like Dubai, London, and Singapore instead of being channeled into local opportunities. He also emphasized the need to differentiate between productive, export-oriented FDI and consumption-driven investments that result in profit outflows without contributing significantly to economic resilience.
Ahmad highlighted that in the previous decade, most foreign investment flowed into the power sector, resulting in large dividend outflows. Going forward, he noted, Pakistan must prioritize investment that boosts exports and discourages ventures that serve only domestic consumption.
He also discussed recent efforts to streamline foreign investment processes, noting that a dedicated forum has been established to facilitate Saudi investment in Pakistan. Under a government-to-government framework, Saudi Arabia sought simplified mechanisms and a consolidated channel for project facilitation. After the 2024 elections, SIFC’s mandate was further refined to focus on identifying viable projects for foreign investors, improving the policy environment, and supporting business operations.
Ahmad concluded by urging the business community to move away from an overreliance on protections and incentives, instead encouraging them to invest in competitive, export-geared industries. He reiterated that without bold fiscal, monetary, and structural reforms, Pakistan risks repeating past cycles of stagnation and external dependence.
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