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Hyber Pakhtunkhwa stands at an important place of its economic journey. Despite Pakistan’s significant progress in macroeconomic stability, the feature of GDP’s 2.68 % increase in fiscal year 2025, the historical basic surplus of 3.0 % of GDP, and inflation in April 2025, declined by 0.3 %, KP’s economic capacity is unrealistic, which is the cause of more structured.
According to the reforms of business regulations in Khyber Pakhtunkhwa, the path to economic growth, the challenges of the business environment, especially the role of the KP as a strategic gateway for regional trade.
The national economic ideological approach has become increasingly stable. The proportion of GDP from investment has increased by 13.8 %, 14.1 % savings and per capita income increased to 8,824. However, the private sector in KP faces scattered, duplicated and often transparent regulatory requirements.
This report provides a bold view of regulatory challenges and disparities in both developed and developed regions. In particular, 87 % of businesses are the sole ownership, which reflects the limited access to high compliance costs and the procedure for formalizing both at the provincial and divisional levels.
Pakistan has seen progress in women’s economic participation, supporting more than 12,000 women -led startups, supported by national incubation centers. However, in KP, the women -led business in KP faces 6 to 13 percent more regulatory burden than similar male -led businesses. The burden results from the obstacles of social movements, the removal of the network and the weakest institutional facility. Intra -provincial disparities in infrastructure and service supply are strict. Most remote divisions have a high formal form in urban centers and permanent obstacles.
The data of the Pakistan Bureau of Statistics has highlighted a wide alphabet, though minor, rehabilitation in industry and services, 4.77 % in the industrial sector and 2.91 % services at the national level. KP’s agriculture and manufacturing sectors are particularly suffering from local regulatory obstacles. Earth acquisition, delay in permission and infrastructure barriers affect the basic and secondary sectors inadvertently. Services face more transactions due to inadequate digital payment and tax system. It has increased due to the slow pace of the national agriculture sector (only 0.56 %), which reflects the rising risks to the low diverse economy of KP.
Private sector credit has improved at the national level, which has reached Rs 767.6 billion in fiscal year 2025, which was Rs 265.2 billion last year. Digital financial inclusion is on the rise, the IT sector has contributed $ 2.8 billion in exports and freelancers $ 400 million. However, only 10 % of the KP -based reserves are re -invested locally. The lack of informal and suicide attacks mostly keeps KP firms out of the mainstream. Digitalization efforts, such as Pakistan single window, offer capacity, but their effects in KP are limited due to communication and literacy difference.
Establishing a formal regulatory review platform at both the divisional and provincial levels will ensure the opinion of the business leaders.
Pakistan’s current account for July to April 2010 reflects a stable external position, which reached $ 1.9 billion and rising foreign exchange reserves, which reached $ 16.6 billion by May 2025. For KP, the increase in trade with Afghanistan and Central Asia represents a major unused opportunity. Contradictory customs procedures, banking inconvenience and weak logistics networks, especially outside Peshawar, continue to grow SME growth from across the border. National reforms such as PSW and CERC promise actions, but KP requires immediate localization.
Pakistan’s financial stability, GDP’s financial deficit, is 2.6 %, with the rising investors with KSE -100, and the Fitch’s upgrade is better in credit rating with Pakistan, provides a favorable backdrop for the regulatory over hall. The challenge lies in translating these national benefits into provincial facts, especially for the left behind areas and outsiders.
To advance economic change in KP, the formation of a provincial digital one -stop shop must be preferred that brings all business approval on a single, integrated platform, including registration, tax, utility and environment. Such digital infrastructure should be compatible with national reforms, but KP’s unique regional and administrative facts should be. At the same time, gender -related regulatory reforms are an important requirement. This includes increasing the national pace for women’s business capabilities, which has set up a provincial women’s business facility desk to remove suicide barriers, increase credit guarantees, and ensure equal access to women -led businesses and institutional support.
Targeting a specific policy on strategic, division should become the central principle of KP regulatory modernization. The newly available macroeconomic headroom should be used to direct public investment by infrastructure and sector priorities, such as strengthening agriculture in South KP and promoting tourism transitors like Malakand.
Financial inclusion, a permanent challenge, calls for a policy shift, which ordered that a large portion of KP -based reserves be allocated to local loans. In addition to the Shariah and expanding digital financial products, promoting partnerships between provincial business associations and financial institutions can remove limited access to the twin obstacles and financing of informal.
Trade convenience and improved border contacts are also important. National trade facility tools such as high -speed localization such as Pakistan single window as well as banking reforms and logistics upgrades are essential in KP key border divisions to support SMEs and especially women -led exporters. Finally, setting up a formal regulatory review platform at both the division and the provincial levels will ensure the ongoing opinion of business leaders, especially youth and women businessmen, which is essential for responsible and adaptable policy reforms.
Comprehensive coverage in reform of business rules in Khyber Pakhtunkhwa, the first diagnostic occupation of regulatory facts in every KP division, which includes urban, rural, developed, and left behind areas, provides new evidence for the process. With the return of macro -stability at the national level, KP should work to translate stability into opportunities by implementing targets, digital first and comprehensive regulatory modernization. By shutting down the implementation gap and localizing national benefits, KP can change from a region that has its potential that has achieved permanent, comprehensive prosperity.
The author is the Research Associate at the Sustainable Development Policy Institute.
