The Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has raised serious concerns over the growing pressure that volatile global oil prices are placing on Pakistan’s macroeconomic stability, warning that repeated international oil shocks combined with high domestic levies are putting significant pressure on exports and industrial activity. FPCCI President Atif Ikram Sheikh said the continued increase in global oil prices is affecting the country’s export competitiveness, widening the trade deficit and increasing the risk of industrial closures. He stressed that the impact of higher fuel prices is extending across the economy, particularly through transportation, logistics, electricity generation and manufacturing costs, leaving export oriented businesses with increasingly limited room to absorb additional expenses.
Atif Ikram Sheikh said higher prices of high speed diesel and furnace oil are substantially increasing inland transportation and logistics expenses while also raising supply chain costs, electricity generation expenses and manufacturing overheads. These increases are creating difficulties for Pakistan’s major export sectors, which are already competing with producers in regional markets where energy and production costs can be lower. According to the FPCCI president, the additional burden is weakening the ability of local exporters to remain competitive and secure international orders. He warned that continued increases in operating costs could place further pressure on industries that depend on maintaining competitive prices in international markets.
The FPCCI chief emphasized that Pakistan urgently requires a dedicated and strategic safety mechanism for exporters to protect industrial activity and prevent widespread de industrialization. He argued that transferring the complete impact of international oil price increases onto the industrial sector would not be sustainable. Rising freight and transportation expenses are reducing the already narrow profit margins available to exporters, making it increasingly difficult for businesses to absorb higher costs while maintaining competitive pricing. The situation could have broader implications for foreign exchange earnings if exporters are unable to maintain production and fulfill international orders because of escalating operating expenses.
To address the pressure created by external oil price shocks, FPCCI has proposed a multi pronged approach focused on reducing costs for export oriented industries and strengthening the country’s energy structure. One of the key demands is the immediate suspension of the Petroleum Development Levy for export oriented manufacturing. According to Sheikh, removing this levy for eligible exporters would provide businesses with a financial buffer at a time when international fuel prices are placing additional pressure on their operations. The measure, he said, could help protect industrial production and preserve the foreign exchange earnings generated through exports.
FPCCI has also called for a faster transition toward alternative and renewable energy sources as part of a broader strategy to reduce the economy’s exposure to international fuel price fluctuations. Alongside fuel related measures, the trade body has stressed the need to rationalize energy tariffs for businesses. Sheikh said electricity and gas tariffs need to become more competitive with regional economies, including Bangladesh, Vietnam and India. He pointed to these countries as examples of economies that have used strategic mechanisms to provide protection to their core industrial sectors during periods of major economic pressure. More competitive energy costs, according to FPCCI, would help Pakistani manufacturers maintain their position in regional and international markets.
In addition to energy related measures, Sheikh urged a significant reduction in the central bank’s policy rate to address the liquidity difficulties facing businesses. He said an aggressive reduction in the policy rate could make working capital more affordable for industrial producers and provide additional support to businesses dealing with sharply rising operational expenses. Lower financing costs could help industries manage their working capital requirements and maintain production at a time when higher fuel, transportation and energy expenses are putting pressure on their finances.
The FPCCI president also highlighted the vulnerability of Small and Medium Enterprises, which form an important part of Pakistan’s export supply chain. He said SMEs do not have the financial strength of larger corporations and are therefore likely to face greater difficulties as operating costs increase. According to Sheikh, these businesses are already experiencing an immediate liquidity crisis as their expenses rise sharply. Without targeted support, he warned that higher costs could lead to factory closures, reductions in production shifts and rising unemployment. FPCCI’s concerns therefore extend beyond individual exporters to the wider industrial base, with the trade body calling for measures that can reduce cost pressures, protect production and support the continued participation of Pakistani businesses in international markets.
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