KARACHI: Multiple tax hikes in the recent budget, along with high utility costs, have increased production costs for small and medium enterprises (SMEs), threatening the survival of hundreds of business.
This was stated by the President Federal B Area Association of Trade and Industry (FBATI), Syed Raza Hussain while commenting on the dire situation of the industry and small and medium enterprises.
The combined impact of high energy costs and high taxation is proving detrimental to the SME sector. Many businesses are on the verge of closing, unable to sustain operations under financial pressure, he said, adding. A decline in SME activity is expected to negatively impact Pakistan’s exports; as these businesses scale back or close, export volumes are likely to decline, exacerbating the country’s trade deficit.
“We are trying to keep our doors open. The cost of electricity has increased manifold since last year. If the situation does not improve, we may have no choice but to close,” he noted.
One of the main challenges facing SMEs is the escalating cost of utilities, including electricity prices, which have risen significantly over the past year. This is due to a combination of increased global fuel prices and inefficiencies within the national grid. The FBATI president said water and gas prices have also seen significant increases, further straining the operating budgets of small businesses.
He mentioned that the government has not announced any financing scheme for SMEs in the budget to boost economic activities in the country, despite the central bank’s suggestion that the government ensure risk coverage through funds in the budget so that banks can get new financing for SMEs .
Adding fuel to the fire, the provincial government issued a groundwater extraction notice without taking the town’s municipal association on board, making it difficult for the industry to continue production.
Small and medium enterprises are the lifeblood of the country’s economy, providing employment to 80 percent of the non-agricultural workforce, contributing 40 percent to GDP and accounting for more than 25 percent of total export earnings. he further remarked.
department stores and medium-sized enterprises contribute significantly to the country’s exports, especially textiles, leather goods and handicrafts.
He appealed to the incumbent government to create an enabling environment through an affordable tax regime and SME financing system to enable SMEs to thrive and contribute to sustainable economic growth.
