Karachi, July 25, 2024 – Business owners across Pakistan have expressed heightened pessimism about their future prospects, citing continued political turmoil and a new tax-heavy budget as major concerns, according to a recent Gallup Pakistan survey.
The sentiment reflects growing dissatisfaction with Prime Minister Shehbaz Sharif’s administration, which is widely viewed as an ineffective manager of the economy.
The survey, conducted in the second quarter of 2024, involved 454 small, medium, and large business owners from over 30 districts. It revealed a decline in the Gallup Business Confidence Index across all three measured strands: current business situation, future business situation, and the direction of the country. The index scores fell by 4% to 10%, indicating a broad-based erosion of confidence.
A significant portion of respondents criticized the government’s financial plan for FY25 as not being business-friendly. About 40% of businesses identified inflation as their most pressing issue. The inflation rate, which surged to 12.6% in June, continues to erode consumer purchasing power, exacerbating the challenges faced by businesses.
According to the Gallup Survey, 54% of businesses believe the current Pakistan Muslim League-Nawaz (PML-N) government is managing the economy worse than its predecessor. “Ongoing political uncertainty and the recent heavy-on-taxation budgets have significantly impacted business optimism,” said Bilal Ijaz Gilani, executive director at Gallup Pakistan and the chief architect of the Gallup Pakistan Business Confidence Index.
The business community, already burdened with various regulatory measures and taxes, expressed serious reservations about the new budget. The number of businesses seeking resolution to taxation issues has risen considerably since the first quarter, driven by the increased taxes imposed in the federal budget last month.
Additionally, power outages remain a critical concern. Six out of 10 businesses reported experiencing crippling load-shedding, with 16% more businesses noting an increase in power outages this quarter due to the heavy load on the country’s power infrastructure during the summer. Overall, 61% of businesses reported issues with load-shedding.
The Gallup Survey highlighted that economic security remains a distant dream for many business owners amid national and global challenges. As a result, the net current business situation score fell by 16% in the second quarter of 2024. Looking ahead, businesses are more pessimistic, with 57% expressing negative expectations for the future. The net future business confidence score worsened by 36% since the last quarter, now standing at -14%.
Pessimism was particularly pronounced among businesses dealing in hardware and tools, electrical items, and manufacturing products. Conversely, businesses selling home decor, accessories, gift items, and cosmetics showed more optimism.
The overall direction of the country score also declined, reaching -64%, a four-percentage-point drop from the previous quarter. Only 18% of respondents felt the country was heading in the right direction.
A sweeping majority of businessmen, 85%, do not consider the government’s new financial plan a “good budget,” with only 11% of manufacturers and 15% of service providers deeming it business-friendly. High inflation and poor business conditions led to a 9% increase in workforce reductions among employers, especially manufacturers. Furthermore, 60% of businesses reported worse sales this year, with manufacturers (66%) faring worse than service providers (58%).
“Governments in Pakistan need to listen and address the concerns of business communities across the country,” emphasized Gilani, urging for more responsive and effective economic policies.