The government has formally directed the State Bank of Pakistan (SBP) to urgently address the growing credit crisis faced by small and medium enterprises (SMEs), as rising costs and limited access to financing continue to threaten the survival of thousands of small businesses across the country. The move follows strong demands by SME representatives for easier access to funding and a simpler, more predictable tax framework that can help stabilize their operations and promote sustainable growth.
SME representatives have called on authorities to shift from the current normal tax regime to a fixed tax system, arguing that complex and unpredictable taxation makes business planning extremely difficult. They have also highlighted the burden of high electricity tariffs and limited banking support as major obstacles to expansion. Industry observers warn that small businesses, considered the backbone of any healthy economy, are gradually being squeezed out by larger enterprises that enjoy greater institutional access and policy support. Experts note that successive governments have failed to adequately protect smaller industrial units, leading to a widening gap between large corporations and local SMEs.
The issue gained renewed attention during a high-level meeting in Islamabad led by Special Assistant to the Prime Minister on Industries and Production, Haroon Akhtar Khan, who met with members of the Sialkot Small and Medium Enterprise Cluster. The meeting was attended by senior officials, including Additional Secretary Industries and Production Asad Islam Mahni, acting Smeda CEO Nadia J. Seth, and representatives of the Sialkot Chamber of Commerce and Industry. During the discussions, Haroon Akhtar described SMEs as the “engine of Pakistan’s economy” and acknowledged that their concerns required immediate and tangible solutions.
The Sialkot SME delegation highlighted persistent challenges, particularly high power tariffs and the lack of access to affordable bank financing. They also raised serious concerns about the country’s surgical instrument industry, pointing out that the absence of accredited testing laboratories is restricting Pakistan’s ability to compete in international markets. According to the delegation, non-accredited surgical instruments are increasingly rejected by global buyers, directly affecting export performance and foreign exchange earnings.
In response, Haroon Akhtar informed participants that the government is actively working on introducing a fixed tax regime for SMEs to simplify compliance and improve business predictability. He also announced the development of a new incentive package for industrial units, under which electricity tariffs would gradually decrease as power consumption increases, a move intended to lower production costs for growing businesses. To address the certification gap in the surgical instruments sector, he directed Smeda and the Trade Development Authority of Pakistan to jointly prepare a strategy for establishing modern accreditation facilities and upgrading existing laboratories to meet international certification standards.
Acknowledging that Sialkot-based SMEs possess export potential worth billions of dollars, Haroon Akhtar stressed that their growth is being severely hampered by limited access to bank credit. He instructed both Smeda and the State Bank to resolve credit access barriers on a priority basis. He further emphasized the need to transform SMEs into dollar-generating enterprises and tasked Smeda with preparing a comprehensive action plan and delivering measurable outcomes in the next review meeting.
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