Ayesha Saba

Pakistan must address low private sector credit uptake by reducing bureaucratic barriers, ensuring policy stability, lowering borrowing costs and upgrading infrastructure. A comprehensive, investor-friendly approach can unlock private sector potential, boosting economic growth and creating jobs.

Talking to WealthPK, an official of Pakistan Business Council, who wished to remain anonymous, said the reluctance of businesses to seek financing for expansion and investment stems from a complex interplay of high borrowing costs, policy unpredictability, and a lack of supportive infrastructure, which collectively dampen investor confidence. “The recent policy rate cut by the State Bank of Pakistan has provided some relief; however, monetary easing alone cannot resolve the structural issues plaguing the private sector.” He emphasised that reducing bureaucratic barriers is pivotal to enabling businesses to thrive.

“Currently, the complex regulatory framework in Pakistan imposes significant compliance costs and delays, deterring potential investors.” The Pakistan Business Council official maintained that streamlining these procedures, especially in areas like company registration, taxation and licensing, could alleviate the administrative burden on businesses and improve the ease of doing business. “Moreover, simplifying access to credit and removing collateral-related restrictions could encourage small and medium enterprises to participate in the economy more actively.”

He also advocated for enhancing policy consistency and transparency to rebuild investor trust. “Frequent changes in fiscal and trade policies create uncertainty, discouraging long-term investments, particularly in sectors such as manufacturing, technology and agriculture. Policy consistency could provide businesses with the confidence to plan and execute growth strategies.” Meanwhile, talking to WealthPK, Dr Waqas Ahmed, development economist at the Centre for Business and Economic Research (CBER), said that the government must also improve the ease of doing business to boost private sector participation.

“Attracting private investment is key to reducing the government’s reliance on borrowing.” He said that with a rapidly expanding population, the economy needs to grow at a much faster pace to meet the rising demand for jobs, housing and essential services. He warned that failure to achieve higher growth rates could exacerbate unemployment and poverty, leading to social and economic instability. “Targeted reforms aimed at revitalising the private sector and boosting investor confidence are a must,” he said.

Ahmed said despite the recent reduction in the SBP’s policy rate, lending rates in Pakistan remain elevated compared to regional peers, reflecting underlying risks such as inflationary pressures and exchange rate volatility. He suggested that improving macroeconomic stability, including curbing inflation and ensuring a stable exchange rate, could lower these risks and subsequently reduce financing costs. “This would enable businesses to borrow more affordably and channel resources toward productive investments.”

Credit: INP-WealthPk