Steep Taxes and High Energy Costs Forcing Some Multinationals to Exit Pakistan, Says Finance Minister Aurangzeb
Finance Minister Muhammad Aurangzeb has acknowledged that high taxation, soaring energy prices, and expensive financing are forcing some multinational corporations (MNCs) to scale down or exit operations in Pakistan. However, he emphasized that despite these challenges, overall investor confidence in Pakistan’s economy remains stable, with new local and foreign investors continuing to enter the market.
Speaking at the Pakistan Policy Dialogue, the finance minister said the government must openly recognize the issue rather than deny it. “There are firms that are leaving Pakistan, which is true,” Aurangzeb said. “We must acknowledge that if taxation is high, energy costs are high, or financing costs are high, these are real issues that impact business decisions.”
Rising Costs Squeezing Multinational Businesses
Aurangzeb explained that rising electricity tariffs, fuel prices, and borrowing costs have significantly increased operational expenses for businesses, particularly multinational firms that must remain competitive across regional and global markets. High costs, he noted, directly affect profit margins, pricing strategies, and long-term investment planning.
Pakistan’s energy costs remain among the highest in the region, while frequent tax changes and compliance requirements have added to uncertainty for investors. According to the minister, these pressures have made it increasingly difficult for some global companies to justify continued operations in the country.
However, Aurangzeb stressed that the challenge is not solely the government’s responsibility. “It takes two to tango,” he said, adding that companies relying on outdated business models are also struggling to survive in a rapidly changing global economy. “If you are wedged into your business models from the last 50 years, it is not going to work in the modern world,” he remarked.
Adaptation Key to Survival in Pakistan’s Market
Despite the exit of some multinational corporations, Aurangzeb pointed out that several global brands continue to operate successfully in Pakistan by adapting their strategies. He cited Nestlé and Unilever as examples of companies that have localized operations to remain profitable.
According to the finance minister, these companies have focused on local sourcing of raw materials, cost control, and export-oriented production. “If Nestlé and Unilever can do local sourcing, which keeps their margins high, they are now able to export, which is why they continue operating here,” he said.
He emphasized that localization, efficiency, and innovation are essential for multinational companies seeking long-term sustainability in Pakistan’s challenging economic environment.
New Foreign Investors Continue to Enter Pakistan
Aurangzeb rejected the notion that Pakistan has become unattractive for investment, noting that 20 new foreign investors have entered the country over the past 18 months. He named major international companies such as Google, Saudi Aramco, Wafi Energy, and Turkish Petroleum among recent entrants.
“These investments demonstrate that investor confidence has not collapsed,” the finance minister said. “There are still opportunities for companies that are willing to adapt and align their strategies with Pakistan’s evolving economic landscape.”
He added that Pakistan’s large consumer market, strategic location, and untapped sectors continue to attract foreign direct investment (FDI), particularly in technology, energy, logistics, and digital services.
Government Pushes Digitisation and Governance Reforms
The finance minister highlighted the government’s aggressive digitisation agenda, announcing that by June this year, all government payments will be processed through digital channels. He said the move is expected to improve transparency, efficiency, and accountability in public finances.
“By June, all government payments are going to go through digital channels,” Aurangzeb said, adding that digitisation will help reduce leakages, curb corruption, and strengthen fiscal discipline.
He also pointed to structural reforms under way at the Federal Board of Revenue (FBR), describing improved compliance and enforcement as essential for strengthening Pakistan’s tax system. “Compliance and enforcement are essential to ensure the implementation of tax laws,” he said.
Duties to Be Phased Out Over Five Years
In a major policy announcement, Aurangzeb revealed that Regulatory Duty (RD), Customs Duty (CD), and Additional Customs Duties (ACDs) will be phased out over the next five years. The goal, he said, is to reduce the cost of raw materials and intermediary goods, making Pakistani industries more competitive.
“This is to bring our intermediary and raw material costs down so we can move toward an export-led growth model,” he explained. Lower duties, he added, would ease cost pressures on businesses and encourage industrial expansion.
The finance minister warned that repeated increases in duties harm the economy and discourage investment. “Duties must be made reasonable and business costs reduced,” he said, calling the ongoing reform process unprecedented in Pakistan’s economic history.
Competition, Exports, and Economic Outlook
Aurangzeb also criticized excessive protection for local industries, arguing that it has weakened competition and innovation. “If we want to move toward export orientation, we have to start from somewhere,” he said, stressing that healthy competition is essential for growth.
On digital finance, the finance minister reiterated the government’s intention to regulate cryptocurrency, stating that a clear regulatory framework would help manage risks while allowing innovation in the financial sector.
He acknowledged that while Pakistan’s trade deficit has widened, the current account remains within official targets. He also noted that large-scale manufacturing showed positive growth in the first quarter of the current fiscal year, indicating signs of economic stabilisation.
Balancing Reforms and Investor Confidence
Overall, Aurangzeb’s remarks reflected a balanced assessment of Pakistan’s economic challenges and reform efforts. While high taxes and energy costs are pushing some multinationals out of the country, the government is pressing ahead with tax reforms, digitisation, trade liberalisation, and regulatory improvements to maintain Pakistan’s appeal as an investment destination.
The finance minister maintained that sustained reforms and adaptive business strategies will be critical to ensuring long-term economic stability and investor confidence in Pakistan.
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