Business leaders call for structural reforms in energy and taxation, clarity from IMF
The government has not completely ruled out the possibility of taking additional taxation measures and has shared some pro-posals with the IMF, said the sources. PHOTO: FILE
LAHORE:
Concerns among the business community of Pakistan are growing over whether the incentives in the recently announced Prime Minister Shehbaz Sharif’s relief package will translate into sustainable economic growth without deeper reforms and clarity from the International Monetary Fund (IMF).
Industry representatives argue that temporary relief, while helpful, cannot replace long-pending structural changes needed to stabilise the economy and restore investor confidence.
The prime minister’s export relief package, announced amid pressure on foreign exchange reserves and sluggish industrial output, includes reduced energy tariffs for export-oriented sectors, faster sales tax refunds, subsidised financing through export refinance schemes and simplified procedures for exporters.
According to government statements, the aim is to enhance export competitiveness, particularly for textiles, leather, surgical goods and value-added manufacturing. Pakistan’s exports stood at around $32 billion in FY25, well below the country’s potential, and policymakers hope these measures will help narrow the persistent trade gap. However, Khadim Hussain, an active business leader and former Lahore Chamber of Commerce and Industry member, cautioned that the announcement alone is not enough. He said that while relief for exporters is a positive step, it remains unclear whether the IMF will approve these specific incentives. He noted that historically the IMF has adopted a strict stance on sector-specific concessions, particularly those related to industry and agriculture.
“Pakistan now needs to take practical steps to reduce its reliance on foreign loans, especially IMF programmes,” he said, adding that repeated borrowing cycles have failed to deliver long-term stability.
Beyond the IMF question, Hussain pointed out that in the past, various sectors were granted special incentives, yet many of them failed to emerge as engines of economic growth. According to him, the government must honestly examine why these policies did not work and introduce timely corrections. “There is a broader concern within the business community that policy inconsistency and weak implementation have undermined the impact of past relief packages.”
Pakistan’s fiscal challenges provide important context. By the end of FY25, total public debt reached Rs80.5 trillion, crossing 70% of GDP, while interest payments consumed more than half of federal revenues. At the same time, private sector credit growth remained subdued, as banks preferred lending to the government through treasury bills and bonds. Business leaders argue that unless government borrowing is reduced, the private sector will continue to be crowded out. Hussain called for a significant cut in the government’s current expenditures. He said that reducing such spending would allow commercial banks to redirect credit towards the private sector, encouraging investment and job creation. This shift, he argued, would also help the Federal Board of Revenue (FBR) to achieve more realistic tax targets, rather than relying on excessive taxation of a narrow base.
Energy sector reforms remain another major concern. Although the government has committed to full cost recovery in electricity and gas tariffs, experts believe that pricing adjustments alone will not fix the problem. Pakistan’s circular debt in the power sector hovered around Rs1.69 trillion by December 2025, despite periodic claims of reductions. Hussain warned that conflicting reports about circular debt, showing improvement one day and deterioration the next, send negative signals to investors and weaken confidence. “Export incentives must be part of a broader reform agenda, short-term relief can support exporters, but without structural reforms in energy, taxation and state-owned enterprises, the economy will remain vulnerable,” said Waseem Tariq, a mid-scale exporter. He added that countries which successfully boosted exports, such as Vietnam and Bangladesh, combined incentives with policy consistency and institutional reforms. Tariq said that exporter relief can provide breathing space, but only if accompanied by clarity on IMF conditions and a credible reform roadmap. “Without that, the relief package risks becoming another temporary fix in a long cycle of economic uncertainty,” he cautioned.
