Qudsia Bano 

The government has taken steps to introduce a comprehensive bankruptcy law aimed at strengthening the investor confidence and bringing Pakistan’s investment climate in line with the international standards, reports WealthPK.

The move is seen as a critical measure to address the longstanding gaps in the country’s legal and financial framework, which experts say have hindered foreign and domestic investment.

Chairing a committee meeting on the introduction of Bankruptcy Law recently, Haroon Akhtar Khan, Special Assistant to the Prime Minister on Finance, underscored the significance of this reform, stating that the absence of a structured bankruptcy framework had long been a missing component in Pakistan’s financial architecture. He said establishing such a legal mechanism is vital to restoring the confidence of international investors and improving the ease of doing business in the country.

To support the development of the law, the committee reviewed the bankruptcy legislation and best practices from various countries, including developed and emerging economies, and concluded that a legal mechanism allowing businesses to exit the market in an orderly fashion is crucial for a healthy investment climate and growth of entrepreneurial activity.

As part of the initiative, the committee announced the formation of a sub-committee comprising legal and financial experts. This sub-committee will be responsible for drafting the proposed law, evaluating various international models, and recommending a legal structure that fits Pakistan’s economic and institutional context. Economic analysts have welcomed the move, calling it a much-needed step to modernize Pakistan’s corporate and financial systems.

Legal expert Asima Hamid noted that the absence of bankruptcy laws in Pakistan often deters serious investors who seek legal protection in case of business failure. “A sound bankruptcy framework not only protects creditors but also allows the struggling businesses to restructure or exit with dignity, which is essential in a dynamic market economy,” she said.

Currently, the businesses in Pakistan face considerable difficulties when shutting down operations, often encountering legal ambiguities and prolonged court proceedings. Introduction of a well-defined bankruptcy law is expected to reduce these obstacles, improve credit access, and enhance financial discipline among firms.

The move comes as Pakistan seeks to attract greater foreign direct investment and deepen its integration into the global economy. The government has also committed broader reforms under its engagement with multilateral institutions, including the International Monetary Fund and the World Bank.

If implemented effectively, the proposed bankruptcy law could significantly improve investor sentiment and contribute to a more resilient and transparent financial system. The sub-committee is expected to present its initial recommendations in the coming weeks, paving the way for formal legislation later this year.

Credit: INP-WealthPk