New local government system for Islamabad gets cabinet's go-ahead

The federal cabinet in its meeting on Friday endorsed a series of key policy decisions, including steps to introduce a new local government system in the capital and the formal ratification of earlier committee rulings.

Chairing the meeting, Prime Minister Shehbaz Sharif underlined economic stabilisation and continued reform as the government's central priorities. He emphasised that growth recorded in the first quarter of the current financial year was a sign of renewed confidence.

The economy had moved from the edge of default towards a steadier footing, the prime minister said, while addressing the cabinet members. He reiterated the government pledge to restructure loss-making state-owned enterprises.

The Prime Minister highlighted the sale of a majority stake in the Pakistan International Airlines (PIA) as a turning point, saying: "The privatisation of PIA is an extremely important milestone in this regard."

He expressed satisfaction that 75% of PIA shares had been privatised through a transparent bidding process, insisting that limiting losses at state entities was essential to the wider economic reform effort and to restoring fiscal space.

Shehbaz also briefed the cabinet on his recent diplomatic outreach, describing his meetings with United Arab Emirates President Sheikh Mohamed bin Zayed Al Nahyan, as extremely useful for bilateral relations. He said he held a "pleasant" call with Saudi Crown Prince Mohammed bin Salman in which both sides reviewed economic and strategic cooperation.

The ministers formally ratified decisions taken by the Cabinet Committee for Legislative Cases (CCLC) at its meetings on December 3 and 30, 2025, including proceedings related to the Islamabad Capital Territory Local Government (Amendment) Ordinance, 2025, which will underpin the planned new local governance structure in the federal territory.

The cabinet further endorsed resolutions from the Economic Coordination Committee's August 26, 2025 session, including relief measures for electricity distribution company consumers under the Off-Grid (Captive Power Plant) Levy and a strategy to manage implementation of the policy.

On the recommendation of the Petroleum Division, the cabinet approved proposal to issue an ordinance to amend the Off-Grid (Captive Power Plants) Levy Act 2025, paving the way for third-party gas sales to off-grid captive power producers under a revised legal framework.

Meanwhile, the federal government, following the cabinet decision, has decided to issue a Local Government Amendment Ordinance, as a summary proposing the ordinance has been forwarded to the president for approval, sources said.

The sources indicated that the Punjab model will serve as the basis for conducting local government elections under the new ordinance. The step reflects the government's intent to streamline local governance structures ahead of upcoming elections, they added.