It did not take Pakistan’s top trade body long. Hardly had Finance Minister Muhammad Aurangzeb delivered his speech on the country’s budget 2026-27 in the Parliament house than FPCCI President Atif Ikram Sheikh and Senior Vice-President Saqib Fayyaz Magoon appeared on camera from Islamabad’s Federation House to give their verdict that the government could not ignore easily.
Their clear message to the nation is that the budget for 2026-27 makes no attempt to reduce the very high industrial costs faced by industries in the country for many years. For the industrialists who believed that this budget would come to their aid, this is a bitter pill to swallow.
The Problem That Will Not Go Away
The high industrial costs in Pakistan is an issue that has been lingering on for years, rather than something new that has caught out the budget planners. Tariffs are still extremely high, and taxes imposed on manufacturing companies are excessive relative to their capacity to pay. Inefficient supply chains add more weight to the producers’ shoulders.
The result of the above scenario is evident in global markets. Pakistanis exporters sit down to negotiate while being loaded with cost structures that their counterparts in countries like Bangladesh, Vietnam, and India do not have. Customers take note and the orders flow elsewhere.
Mixed Messages from a Rs. 18.7 Trillion Budget
For one thing, FPCCI did not reject the budget outright. In fact, the chamber referred to the budget as a “mixed bag,” recognizing both achievements and shortcomings.
The first of these achievements is that Pakistan’s economy has truly stabilized itself over the last couple of years. This can be seen from factors such as GDP growth rate of 3.7 percent, reduced fiscal deficit, increased foreign exchange reserve, and increased per capita income.
There were also other specific measures in the budget which have been appreciated as well. For example, tax relief provided to salary earners alleviates the strain faced by those who have been struggling due to high levels of inflation for long periods of time. The incentives being provided to IT exports reflect their genuine growth potential.
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Three Unaddressed Demands
The FPCCI mentioned three demands that were unmet by the budget, all of which relate to the problems of high costs for industries.
Reduction in energy cost would come at the top of the agenda. The prices of electricity and natural gas for industries are much higher than average rates across neighboring countries.
Secondly, there were tax concessions for the industries. Industrial tax structures in competing countries have much more to offer. This budget did not address that problem.
Lastly, there was need for general tax reforms. The proposal of FPCCI does not stop with minor changes but calls for a comprehensive restructuring of an existing tax system that discourages formal production. This Finance Bill is deficient in that respect.
Underlying Weaknesses That the Budget Cannot Conceal
Headlines aside, there were three major weaknesses underlying the budget that FPCCI identified: poor ratios of investments, lack of savings domestically, and increased unemployment.
Industrial policy must come into play, one that explicitly seeks to reduce costly industry structure, provides incentives for committed investment, and establishes a framework for business planning.
The chamber also highlighted one particular issue concerning the imposition of additional levies in the budget. The introduction of these charges could potentially result in higher input costs and hence lead to inflationary pressures, which would effectively undermine the progress made by the government on a macroeconomic front.
