Economy faces downside risks: FPCCI

Karachi: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh has expressed worry over the widening trade deficit in 2MFY27, which surged 18.1% to $7.1 billion from $6.025 billion. Acknowledging a modest uptick in overall economic activity, Sheikh cautioned that the surge in imports has far outpaced export growth, signaling a severe threat to the nation's economic stability and foreign exchange reserves.

In a statement, he attributed the sluggish export performance to crippling business costs rather than a lack of industrial capacity or entrepreneurial spirit. Export-oriented industries are being pushed to the brink, losing competitiveness in global markets, he emphasized. The central bank's exorbitantly high policy rate acts as a significant roadblock to trade and industry, making it impossible for businesses to generate sufficient profit margins to service expensive loans, he explained.

Furthermore, exorbitant electricity tariffs driven by massive capacity charges and cross-subsidisation burdens have made it unfeasible for factories to expand production, according to the FPCCI chief. The inefficiency of power tariffs is rendering key export sectors underperforming and eroding their global market share. Gas supply disruptions and elevated petroleum prices have eroded the profit margins exporters depend on for securing international orders, further inflating the final cost of exportable goods through the supply chain.

The dominant interest rates and exorbitant energy costs are straining local manufacturing, causing it to shrink and prompting the economy to rely on expensive imports to meet domestic demand. Sheikh called on the prime minister, Ministry of Finance, Ministry of Commerce, and State Bank of Pakistan to convene with the business community urgently to devise a crisis-response strategy to prevent industrial closures and salvage FY27 export targets.

He demanded an aggressive reduction in the policy rate to provide affordable capital for industrial production, immediate rationalization of electricity and gas tariffs to align with regional counterparts, and targeted relief on petroleum levies for goods transport to alleviate domestic supply chain costs.