FPCCI Raises Alarm Over Pakistan’s Widening Trade Deficit in Early FY27
FPCCI President Atif Ikram Sheikh calls for urgent action on interest rates, energy costs and transport expenses to protect exports
FPCCI President Atif Ikram Sheikh speaks on Pakistan’s widening trade deficit and export challenges
KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh has expressed serious concern over Pakistan’s widening trade deficit in the first two months of fiscal year 2026-27.
Pakistan’s trade deficit reached $7.1 billion in July and August, up 18.1% from $6.025 billion during the same period last year.
Atif Ikram Sheikh said the sharp rise in imports has outpaced export growth. Consequently, the widening gap could put further pressure on Pakistan’s macroeconomic stability and foreign exchange reserves.
Export Growth Struggles to Match Imports
The FPCCI president acknowledged some improvement in overall economic activity. However, he warned that export growth remains too weak to balance rising imports.
According to Sheikh, the problem does not stem from a lack of industrial capacity or entrepreneurial activity. Instead, he blamed the high cost of doing business for weakening Pakistan’s export competitiveness.
Moreover, he said export-oriented industries face growing pressure from regional competitors. As a result, Pakistani manufacturers are struggling to secure international orders and retain global market share.
High Interest Rates Hurt Industry
Sheikh identified high interest rates as one of the biggest barriers facing businesses.
He said expensive borrowing has restricted access to working capital. It has also discouraged manufacturers from investing in modern equipment and expanding production.
At the same time, the FPCCI president argued that industries cannot sustain high financing costs while operating on narrow profit margins.
Therefore, he called for a significant reduction in the policy rate. In his view, cheaper financing would help businesses increase production and support export growth.
Energy Costs Weigh on Exporters
Electricity prices have also become a major concern for industrial users.
Sheikh said repeated increases in electricity tariffs, along with capacity charges and cross-subsidy costs, have made production increasingly expensive.
Meanwhile, gas supply disruptions and higher gas costs have further squeezed exporters’ margins.
The FPCCI president stressed that Pakistan needs regionally competitive electricity and gas tariffs. Without such measures, he warned, major export sectors could continue losing their competitive position.
Fuel Prices Increase Supply Chain Costs
Higher petroleum prices have added another layer of pressure on businesses.
According to Sheikh, expensive fuel raises transportation and logistics costs across the economy. Consequently, manufacturers face higher expenses before their products even reach ports.
Furthermore, increased inland freight costs can make Pakistani exports less competitive in international markets.
He said targeted relief on petroleum levies for goods transportation could help reduce supply chain costs.
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Import Dependence Could Deepen
Sheikh warned that expensive domestic production could increase Pakistan’s reliance on imports.
When local manufacturing becomes less competitive, businesses may struggle to meet domestic demand at affordable prices. As a result, the country could face higher import bills alongside weaker export performance.
The FPCCI president described this as a cycle that could widen the trade deficit further.
In addition, declining export orders could put greater pressure on the national exchequer and foreign exchange reserves.
FPCCI Seeks Urgent Government Action
The FPCCI has urged the Prime Minister, Ministry of Finance, Ministry of Commerce and State Bank of Pakistan to immediately consult the business community.
The federation wants the government and private sector to develop a crisis-response strategy for FY27.
Its key demands include a substantial reduction in the policy rate. It also seeks immediate rationalisation of electricity and gas tariffs.
Furthermore, FPCCI has called for targeted relief on petroleum levies for goods transportation.
According to Sheikh, these measures are necessary to prevent widespread industrial closures and protect Pakistan’s export targets for FY27.
