ISLAMABAD (ABC) – As Pakistan’s economy grapples with a confluence of challenges, including soaring interest rates and a debilitating economic slowdown, the nation’s small and medium-sized enterprises (SMEs) find themselves particularly vulnerable to a looming default crisis.
Speaking to WealthPK, Majid Shabbir, Policy Advisor Islamabad Chamber of Commerce and Industry, said, “Pakistan’s SMEs are facing several challenges, the most significant is the high-interest rates imposed by the central bank in its efforts to curb inflation and burdening of taxes.”
He said while these measures may provide short-term relief to the government’s fiscal woes, they pose significant challenges for businesses already grappling with a myriad of economic pressures.
Many small businesses find it increasingly difficult to service their debt obligations, pushing them perilously close to default.
Moreover, the inconsistent policies and the perceived lack of opportunities in Pakistan have driven some businesses to explore alternative markets.
“We’ve received feedback from businesses that have shifted their operations to countries like India due to more consistent policies and greater opportunities,” he disclosed.
Additionally, the ICCI advisor said political turmoil and disruptions had greatly affected the real estate and construction industries, resulting in a complete halt in growth.
Furthermore, the individuals who had previously made significant investments in these sectors have seen a considerable decrease in the value of their investments.
“Given these challenges, it is imperative to take immediate action to avert a potential crisis.
The new government must prioritize implementing measures aimed at supporting the struggling businesses by including targeted interventions to alleviate the burden of high-interest rates, support for sectors facing acute distress, and efforts to stimulate economic activity,” he stressed.
“Furthermore, the government must prioritize confidence-building measures, engage with the business community and demonstrate a commitment to creating a favourable business environment through consistent policies and meaningful incentives,” he asserted.
Requesting anonymity, an official from the Ministry of Commerce, Industry, and Investment told WealthPK, “We recognize the hurdles confronting SMEs and are taking proactive steps to address them.
Through targeted initiatives aimed at enhancing access to finance, streamlining regulatory processes, and promoting innovation and entrepreneurship, we aim to unleash the full potential of SMEs and propel Pakistan towards a sustainable economic growth.”
“The government recently launched a program to assist 20,000 small businesses as part of a comprehensive strategy to address Pakistan’s $20 billion trade deficit. SMEs play a pivotal role in driving economic activity, creating jobs, and fostering innovation.
We must provide them with the necessary support and resources to thrive and contribute to Pakistan’s economic prosperity,” the official said.