ISLAMABAD: The federal cabinet has abolished income tax on the profits earned on loans given to foreign banks.

Foreign banks have been making a profit on 3 billion in loans to Pakistan over the past year. The loans were obtained by the government to keep foreign exchange reserves in double digits.

The Federal Minister for Science and Technology has confirmed to the Express Tribune that the Cabinet has (Thursday) approved a summary of the abolition of income tax on foreign loans. Of the 3.4 billion in loans, 2 billion came from China. In the last two months, the federal cabinet has exempted foreign loans worth Rs 5.5 billion from taxes.