The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has raised serious concerns over the widening trade deficit recorded during the first two months of Fiscal Year 2026-27, warning that the latest trade figures could create additional pressure on Pakistan’s macroeconomic stability and foreign exchange reserves. FPCCI President Atif Ikram Sheikh said the country’s trade deficit increased by 18.1% to $7.1 billion during July and August 2026, compared with $6.025 billion recorded during the corresponding period of the previous year. While acknowledging signs of a slight recovery in overall economic activity, he expressed concern that the growth in imports has significantly outpaced the increase in exports, creating a widening gap that could place further pressure on the country’s external position.
Atif Ikram Sheikh said the inability of exports to keep pace with imports should not be attributed to a lack of industrial capacity or entrepreneurial activity in Pakistan. Instead, he identified the high cost of doing business as a major factor affecting the competitiveness of domestic industries. According to the FPCCI president, export-oriented industries are facing increasing difficulty competing with regional producers because of expensive financing, energy costs, gas supply challenges and high transportation expenses. These pressures are affecting manufacturers’ ability to maintain competitive prices in international markets while also limiting their capacity to expand production and pursue new export orders.
The FPCCI president particularly highlighted the impact of interest rates on industrial activity. He said the prevailing policy rate remains a major obstacle to the smooth functioning of trade and industry, as businesses face high borrowing costs when seeking financing for working capital and investment. According to Sheikh, industries cannot easily operate with profit margins sufficient to absorb expensive loans, resulting in slower private sector credit growth. The high cost of borrowing also limits manufacturers’ ability to obtain working capital required for day-to-day operations and prevents businesses from making investments in modernization, machinery and other long-term improvements that could strengthen productivity and export capacity.
Energy costs were also identified as a major challenge facing Pakistan’s industrial sector. Sheikh said repeated increases in electricity tariffs, along with the impact of capacity charges and cross-subsidization burdens, have made it increasingly difficult for factories to expand production. He stressed that export-oriented industries require electricity tariffs that are competitive with those faced by producers in regional markets. Without access to reasonably priced energy, Pakistani manufacturers could continue to struggle to compete internationally, potentially resulting in declining market share and weaker export performance. The FPCCI leadership believes that reducing energy-related costs is therefore necessary to improve industrial productivity and protect the country’s export base.
Gas supply and pricing have also affected exporters, according to the FPCCI president. Sheikh said disruptions in gas supply and increased costs have further reduced the already narrow profit margins available to export-oriented businesses. For manufacturers that depend on gas for production processes, unreliable or expensive supply can affect both output and production costs. These challenges become particularly significant when companies are competing for international orders against producers operating in markets with lower energy and production expenses. The FPCCI therefore considers improvements in the cost and availability of gas to be an important part of efforts to restore the competitiveness of domestic industry.
Petroleum prices were another concern raised by the FPCCI leadership. Sheikh said elevated petroleum costs have a wider impact on the economy because they increase expenses throughout inland logistics, supply chains and goods transportation. Higher transportation costs raise the overall cost of products before they reach ports for export, making it more difficult for Pakistani exporters to offer competitive prices to international buyers. The impact extends beyond exporters themselves, as higher logistics expenses can also affect manufacturers, distributors and other businesses involved in moving goods across the country.
Sheikh warned that the combination of high interest rates and expensive energy inputs could contribute to a decline in domestic manufacturing while increasing dependence on imported goods to meet local demand. He described this as a cycle that could further widen the trade deficit, reduce export orders and place additional pressure on the national exchequer. If domestic production becomes less competitive, businesses may face greater difficulty expanding capacity and retaining international customers. At the same time, increased reliance on imports could increase demand for foreign exchange, adding further pressure to the country’s external position.
The FPCCI leadership has called on the Prime Minister, Ministry of Finance, Ministry of Commerce and State Bank of Pakistan to immediately engage with the business community and develop a crisis-response strategy for the trade and industrial challenges facing the country. The federation said government institutions need to work directly with businesses to identify measures that can address the rising cost of production and protect export-oriented industries. FPCCI believes that a coordinated response is necessary to prevent further deterioration in industrial competitiveness and to support the country’s export objectives for Fiscal Year 2026-27.
Among its key demands, FPCCI has called for an aggressive reduction in the policy rate to make financing more affordable for businesses and support industrial production. The federation has also demanded immediate rationalization of electricity and gas tariffs so that domestic industries can compete more effectively with regional producers. In addition, it has sought targeted relief on petroleum levies applicable to goods transportation to reduce supply chain and logistics costs. According to FPCCI, these measures would help lower the cost of doing business, improve the competitiveness of exporters and provide industries with greater capacity to maintain and expand production.
The trade body has warned that without timely action, rising production and operating costs could continue to undermine Pakistan’s export performance during FY27. The widening trade deficit in the first two months of the fiscal year has added urgency to the business community’s concerns, particularly as imports continue to grow faster than exports. FPCCI maintains that reducing financing, energy and transportation costs will be essential for supporting manufacturers and exporters, protecting industrial activity and improving Pakistan’s position in international markets. The federation has therefore urged the government and State Bank of Pakistan to work with the business community on immediate measures aimed at stabilizing the trade balance and supporting the country’s export targets.
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