Pakistan’s top-listed companies have been compelled to downsize in response to increasing tax rates and escalating operational costs over the past few years. This comes as Islamabad continues its reliance on International Monetary Fund (IMF) bailouts.
Among the companies affected, Engro Corporation, one of the largest conglomerates in the country with a market capitalization exceeding $580 million, has laid off employees across various sectors, including trading, logistics, and pesticides, as well as within some of its internal departments. Although Engro has not provided an official comment, sources indicate that over 100 employees have been let go across different business units.
Similarly, Amreli Steels, a leading steel manufacturer, has reduced its production capacity by 30% and temporarily ceased operations at its Karachi SITE rolling mill. While an official, who requested anonymity, confirmed that over 300 employees were affected by the downsizing, the company has not issued a formal statement.
Layoffs in both firms were reported on professional networking platforms, including LinkedIn, with some posts indicating the job cuts preceded financial results that showed Amreli Steels incurred a loss of Rs6.1 billion for the fiscal year ending June 30, 2024, driven by declining sales and rising costs.
The textile sector has also seen significant challenges, with Aruj Industries Limited, a fabric manufacturer and exporter, recently announcing a temporary suspension of production. This followed a similar decision by Naz Textiles (Private) Ltd, which ceased operations entirely.
Last week, Indus Motor Company announced a five-day shutdown of its plant, citing inventory shortages and a lack of essential components. However, the company’s CEO confirmed that no layoffs have occurred in this case.
These developments reflect the broader challenges facing Pakistan’s economy. Despite reporting a GDP growth of 3.07% in the April-June quarter of FY2023-24, industrial activity contracted by 3.59%, marking the third consecutive quarterly decline in the sector, according to data from the National Accounts Committee.
At a recent consultative meeting on the Federal Board of Revenue’s (FBR) proposed transformation, Chairman Rashid Mahmood Langrial acknowledged that high taxation was discouraging businesses from operating in Pakistan and prompting skilled workers to seek opportunities abroad. The country’s FY2024-25 budget, which includes increased taxes on formal sectors such as salaried individuals, has drawn criticism and sparked protests.
During a press briefing, Finance Minister Muhammad Aurangzeb conceded that elevated tax rates are a burden but did not specify any immediate measures to alleviate the pressure. Resistance to the government’s plan to tax traders remains strong, and tax exemptions for former Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) have been extended.
Despite these tax hikes, the FBR is projected to face a revenue shortfall exceeding Rs100 billion for the first quarter of FY2024-25, raising concerns about the potential for a supplementary budget. Analysts suggest that as Pakistan navigates another IMF bailout, efforts to improve tax collection, reform the power sector, and advance privatization will be closely monitored.
