Govt urged to protect SMEs from closure: FBATI President

The increase in multiple taxes in the recent budget coupled with the high cost of utilities have surged the cost of production of the Small and Medium Enterprises (SMEs), threatening the survival of hundreds of business units, leading to possible shutdowns, layoffs, and a decline in exports.

This was stated by President Federal B Area Association of Trade and Industry (FBATI), Syed Raza Hussain, while commenting on the dire situation of industries and SMEs.

The combined impact of high utility costs and heavy taxation is proving detrimental to the SME sector. Many businesses are on the brink of closure, unable to sustain operations under the financial strain, he said and added. The downturn in SME activity is expected to negatively affect Pakistan’s exports; as these businesses scale back or shut down, export volumes are likely to decline, exacerbating the country’s trade deficit.

“We are struggling to keep our doors open. The cost of electricity alone has increased manifoldly since last year. If the situation doesn’t improve, we may have no choice but to shut down our operations, he remarked.”

One of the primary issues SMEs are facing is the escalating cost of utilities, including electricity prices, which have surged significantly over the past year. This is driven by a combination of increased global fuel prices and inefficiencies within the national grid. President FBATI said that water and gas prices have also seen substantial hikes, further straining the operational budgets of small businesses.

He mentioned the government did not announce any financing scheme for SMEs to accelerate economic activities within the country in the budget despite the central bank’s proposal for the government to provide risk coverage through funds in the budget to empower banks on their fresh financing to SMEs.

Adding fuel to fire, the provincial government issued a notification for subsoil water extraction without taking onboard the town association of the city, making the situation more challenging for industries to continue their production.

SMEs are the lifeline of the country’s economy, providing employment to 80 percent of the non-agricultural workforce, contributing 40 percent to GDP, and accounting for more than 25 percent of total export earnings. he further remarked.

Small and medium enterprises contribute significantly to the country’s exports, particularly textiles, leather goods, and handicrafts.

He appealed to the incumbent government to create an enabling environment through an affordable tax regime and an SME financing scheme that can enable SMEs to thrive and contribute to sustainable economic growth.