Pakistan Moves to Fast-Track Special Economic Zones Despite IMF Constraints
In a clear signal of its commitment to industrial growth and foreign investment, Pakistan’s Board of Investment (BoI) is accelerating Special Economic Zone (SEZ) development. The push comes despite the IMF’s Extended Fund Facility (EFF) restrictions, which curb new SEZs unless they fall within prior obligations or receive explicit approval from the relevant SEZ authorities. The government is leveraging zones already legally protected under the SEZ Act, 2012 to maintain momentum on job-creating projects while navigating the IMF’s tight rules.
IMF-EFF Restrictions: What Still Qualifies as a New SEZ?
The IMF’s EFF, approved on September 25, 2024, restricts the establishment of new SEZs. It allows exceptions only for zones tied to existing international commitments or projects cleared by the SEZ authority. In practical terms, Pakistan’s BoA has been asked to grant SEZ status to projects already safeguarded under the SEZ Act, ensuring continuity of development where legal protections are in place. This approach aims to maximize the impact of limited fiscal space and keep key projects on track.
Key SEZs in the Pipeline, Including an Iran-Linked Zone
Several SEZs tied to international commitments remain on the table. Notably, the Gabd-Rimdan Border SEZ is being developed under a 2024 memorandum of understanding with Iran, reflecting broader regional economic cooperation. Other zones with declared international obligations include:
- Mohmand SEZ
- Karachi Industrial Park
- Federal SEZ in Islamabad, approved under the Pak-China Joint Cooperation Committee of CPEC in 2016
Letters of Intent are now being issued to identify development partners and expedite submissions under the applicable rules. This structured approach helps ensure that these zones progress within the IMF framework while capitalizing on strategic regional ties.
Progress in Gilgit-Baltistan and Private Sector Initiatives
The Gilgit-Baltistan (GB) region is not being left behind. In January 2025, the Moqpandas Export Processing Zone (EPZ) was approved in principle, pending a few formalities. A Letter of Intent issued by BoI has empowered the GB government to begin negotiations with potential investors. The application has since been resubmitted for final approval, with the BoA expected to grant SEZ status after completing due process.
Private-sector SEZ proposals are also advancing in Punjab and Sindh. Notable projects include:
- United Business Park in Lahore (258.7 acres near Raiwind)
- Capital SEZ in Chakwal
- Green Industrial Park in Lahore (63 acres)
Following expert recommendations from SEZA Punjab, per-acre industrial plot costs have been revised to reflect a more competitive landscape: Rs 99 million for Punjab’s Capital SEZ and Rs 40 million for Chakwal’s project.
Cost-Reduction Measures and New Land-Lease Models
To attract investors, the Pakistan Industrial Development Corporation (PIDC) has proposed a new annual preferential land lease model at $10,000 per acre per year for up to 50 years. This initiative aims to reduce upfront costs and provide longer-term certainty for developers, increasing the appeal of SEZs in a crowded global investment space.
Coordinated Efforts Across Agencies
The BoI has been working with a cross-ministerial coalition, including the Special Investment Facilitation Council (SIFC), the Ministry of Industries and Production, SEZA Sindh, and PIDC, to formulate new qualification criteria for SEZs. These collaborations seek to streamline approvals, attract investment, and ensure that SEZs operate under clear, investor-friendly rules while aligning with IMF constraints.
What This Means for Pakistan’s Economic Trajectory
Pakistan’s deliberate push to implement pre-approved SEZs and to move forward with zones tied to international commitments signals a pragmatic strategy to attract investment within the IMF’s narrow window. By prioritizing zones with legal protections and targeted cost reductions, the country aims to stimulate industrial development, create employment opportunities, and diversify export earnings. As these SEZs come online, they are expected to reinforce Pakistan’s broader growth agenda while maintaining compliance with international financial arrangements.
Conclusion
With IMF restrictions shaping the pace and scope of SEZ expansion, Pakistan’s approach combines adherence to the EFF with proactive development of both public and private sector zones. The inclusion of the Iran-linked Gabd-Rimdan Border SEZ and the expansion of domestic zones like Mohmand, Karachi Industrial Park, and the Islamabad Federal SEZ underscore a strategic balance between international collaboration and sustainable industrial growth.
