As the year 2025 draws to a close, Pakistan's industrial and commercial sectors are looking towards 2026 with mounting anxiety. Business leaders across the country warn that persistently high operational costs, dwindling competitiveness, and unclear policy directions threaten to stall the nation's economic momentum in the coming year unless urgent corrective measures are implemented.
Core Issues of Cost and Competitiveness Remain Unaddressed
While acknowledging some improvement in macroeconomic stability compared to previous years, industry representatives stress that ground realities remain harsh for manufacturers, exporters, and investors. Khawaja Mehboob ur Rehman, President of the Pakistan Business Forum (PBF), stated that 2025 proved to be another difficult year for businesses. In a letter addressed to the Prime Minister, he highlighted that despite repeated government commitments, fundamental problems related to ease of doing business and a sustainable reduction in operational costs have not been meaningfully resolved.
This policy inaction, Rehman argued, has severely restricted the capacity of companies to plan for the future and expand their operations. A primary concern is the persistently high cost of inputs. Electricity tariffs, fuel prices, taxes, and financing costs continue to squeeze the manufacturing and export-oriented sectors, eroding their profit margins.
Official data confirms that industrial electricity rates in Pakistan are substantially higher than those in several competing regional economies. This disparity places Pakistani exporters at a severe disadvantage in the fiercely competitive global market, where they operate on very thin margins. Economists note that although Pakistan's exports saw a modest recovery in the fiscal year 2024-25, the growth rate paled in comparison to regional peers who benefit from cheaper energy and targeted industrial support policies.
Energy Pricing: A Critical Threat to Jobs and Stability
The issue of energy costs has become a flashpoint for the industry. Khawaja Mehboob ur Rehman warned that high energy costs are directly crippling productivity and destroying export competitiveness. He expressed grave concern over reports suggesting electricity tariffs might increase further as part of efforts to manage the circular debt in the power sector. Such a move, he cautioned, could compel numerous industrial units to scale down their operations or shut down entirely.
This threat is particularly acute for sectors like textiles, engineering, and chemicals, where energy already constitutes a major portion of production costs. Power sector data indicates that these industries collectively employ millions of workers. Analysts warn that any sharp hike in energy prices could trigger higher unemployment, exacerbating social strain at a time when job creation is already under pressure.
Calls for Policy Predictability and Inclusive Reform
Beyond immediate cost pressures, business leaders have raised questions about the overall direction of economic policymaking. Rehman contended that current policies seem excessively focused on meeting conditions set by the International Monetary Fund (IMF), leaving little room for innovative, growth-oriented solutions. He emphasized that sustainable economic recovery is impossible without empowering the business community, which forms the backbone of employment, exports, and revenue generation for the country.
Echoing the need for a balanced approach, Rameez Ahmed, a mid-scale manufacturer, acknowledged the necessity of structural reforms and engagement with international lenders like the IMF. However, he stressed that policies crafted without substantive input from industry stakeholders often fail in practice. What businesses urgently require, according to Ahmed, is predictability, competitively priced energy, and a tax system that incentivizes documentation and growth.
A related concern is the perceived exclusion of elected business leaders from key economic committees and working groups. Industry representatives argue that this omission weakens policy effectiveness and slows implementation, as it bypasses the direct experience of those involved in production and trade. They believe meaningful consultation is essential to bridge the gap between policy objectives and market realities.
There is a growing consensus that Pakistan must now pivot its focus from short-term stabilization to building long-term competitiveness. Referencing the nation's unified response on the security front during the tensions of May 2025, Rehman stated that the next critical challenge is to "win the economic battle." The business community asserts that only a credible and clear roadmap for 2026 can restore confidence, attract fresh investment, and facilitate long-term planning.
"Inflation has eased from its earlier peaks, and interest rates are expected to gradually normalize," added Rameez Ahmed. "Many of us believe the coming period offers a crucial opportunity to reset policies in favor of growth—but this can only happen if cost pressures and competitiveness issues are addressed in a timely and inclusive manner."
