Finance Minister Sartaj Aziz announced a series of tax exemptions on 6 May which aim to open the country's capital markets to foreign investors, as well as boost local investment. The announcement was made at a news conference in Islamabad, Reuters reports.

The package includes the extension of capital gains tax exemption for a further three years. The exemption was due to expire on 30 June 1998. Measures also include the exemption of bonus shares from tax and the removal of a 0.5 per cent turnover tax on share transactions. Aziz also said that foreign investment in government securities and corporate fixed-income securities will be made tax free. Earnings from debt instruments are currently taxed at up to 60 per cent.

In order to encourage participation in the market by local investors, employee provident funds are to be allowed to invest up to 20 per cent of their funds in listed securities, instead of the maximum 10 per cent currently allowed. The package also aims to attract smaller investors to the market by exempting mutual fund and collective investment scheme dividends from tax.

Analysts welcomed the measures saying that they would provide a boost to the market and could increase the government's foreign exchange reserves. Some of the measures are to be enacted immediately, whilst others will come into force with the June budget, Aziz said.