Laws & Taxes

Saudi and Kuwaiti investors with a 30.7% stake in K-Electric filed a $2 billion arbitration case against Pakistan on January 16, 2026, alleging regulatory blocks on a $1.77B sale to Shanghai Electric, unpaid subsidies, tariff meddling, and fund diversions. The dispute, ongoing since 2016, claims breaches of OIC and bilateral treaties, risking Pakistan's investor trust.

Punjab orders strict enforcement of 2022 Building Safety Regulations province-wide, with legal action for violations. Minister Khawaja Salman Rafique chaired a Lahore meeting revealing surveys of 2,214 high-rises, Rs 2B fire service expansion, and Rescue 1122's feats (280K+ fires handled, Rs 768B saved). Upgrades align with CM Maryam Nawaz's vision; businesses urged to comply.

In response to an IMF diagnostic report highlighting institutional weaknesses, the federal government has formed a 15-member high-level committee to overhaul Pakistan’s economic governance. Led by the Finance Minister, the panel is tasked with strengthening accountability and institutional capacity, a move the IMF estimates could boost GDP by 5% to 6.5% over the medium term. The committee includes top officials from the State Bank, SECP, and various ministries, and will submit progress reports to the Prime Minister on a quarterly basis.

Pakistan's State Bank of Pakistan (SBP) reserves rose by $13 million to $15.915 billion as of December 26, 2025, contributing to total liquid reserves of $21.012 billion despite a slight drop in commercial banks' holdings. This provides about 3.2 months of import cover amid ongoing debt pressures. The improvement marks a strong recovery from 2023 lows below $3 billion, aided by IMF support and bilateral aid, while domestic gold prices fell Rs2,400 per tola to Rs454,562.

Pakistan's economy grew 3.71 percent in Q1 FY26 (July-September), up from 1.56 percent last year but down from the prior quarter's 6.17 percent due to weak demand and floods. Industrial output surged 9.38 percent, agriculture rose 2.89 percent despite crop declines, and services increased 2.35 percent. SBP projects 4 percent FY26 growth, with the government targeting 4.2 percent.

The Federal Board of Revenue (FBR) sealed two sugar mills in central Punjab for violating sales tax laws, including Section 40C of the Sales Tax Act, 1990, and related rules mandating sugar sector monitoring. In parallel, FBR suspended six officials for unauthorized absence from monitoring duties, initiating disciplinary action to enforce accountability. These steps underscore FBR's zero-tolerance policy on tax non-compliance and internal misconduct, aiming to protect revenue and ensure transparency.

Government borrowing from banks has risen to Rs672 billion in the first half of FY26, reversing last year’s debt retirement trend. The State Bank of Pakistan reports that 86 per cent of the fiscal deficit is financed through banks, limiting liquidity for the private sector. Analysts expect higher borrowing in the second half due to revenue shortfalls. Despite increased dividend transfers of Rs2.7 trillion in FY25, reliance on domestic sources remains high as external funding lags. Meanwhile, the World Bank has approved $700 million under a $1.35 billion initiative to help Pakistan strengthen fiscal management and boost public sector efficiency.

Pakistan's government has agreed to 11 new IMF targets, including tax hikes and spending cuts from next month, after missing 11 prior benchmarks in its $7 billion Extended Fund Facility.Immediate actions address FBR shortfalls of Rs430 billion in FY26's first five months by raising excise duties on fertilizers, pesticides, and sugary items, plus shifting goods to 18% GST if revenues lag. Waivers cover misses on social spending, deficits, and tax returns, unlocking $1.2 billion disbursement post second review. Plans include FBR reforms by March 2026, tax policy strategy by December 2026, agriculture tax optimization, SEZ incentive phase-out by 2035, power sector privatizations starting early 2026, asset declarations, NAB risk plans, and SOE/SWF law amendments by mid-2026

FBR has updated property valuation rates in Islamabad across 68 areas, raising taxes in premium sectors like E-7 and F-7 while adjusting others downward.Superstructures up to five years old are now valued at Rs 4,000 per square foot, older ones at Rs 3,000; residential plots in E-7 reach Rs 600,000 per square yard, with farmhouses in Gulberg Green at Rs 17.55 million per kanal and commercial spots in E-7/F-7 up to Rs 2.5 million. These immediate revisions aim to align with market rates, boosting transparency and impacting capital gains taxes.High-end zones like DHA, Bahria Enclave, and F-6/F-8 see sharp hikes, while rural valuations follow District Collector rates, streamlining real estate transactions citywide