New Delhi, Feb 19 (NationPress) The ongoing challenges to Pakistan's economic growth might not stem from low productivity or insufficient innovation, but rather from the elevated expenses associated with conducting business due to government policies, as highlighted by a recent analysis from the private sector, reported by Nikkei Asia.

The findings, drawn from a study by the Pakistan Business Forum (PBF) and cited by The News International, reveal that the cost of operating a business in Pakistan is 34% higher than in similar South Asian countries.

Industry leaders assert that this is a persistent problem, rooted in structural issues such as high energy costs, substantial taxation, expensive loans, and currency depreciation.

The report indicates that electricity rates in Pakistan average approximately Rs34 per unit, nearly double the regional average of Rs17.

Additionally, fuel prices are encumbered by a petroleum levy of around Rs80 per litre. With interest rates at a high of 12.5%, borrowing remains costly for businesses.

Simultaneously, the Pakistani rupee has significantly depreciated from Rs 110 per dollar in 2018 to about Rs 280 by December 2025, which escalates the costs of imported raw materials and machinery, as noted in the report.

The effective tax burden on businesses can soar to as much as 55%, far exceeding regional standards.

Business associations argue that such a tax burden limits available funds for reinvestment and growth, dissuading expansion efforts.

This situation is mirrored in workforce trends; data from Gallup Pakistan indicates that salaried employment now comprises over 60% of the workforce, a rise from approximately 53% in 2010–11.

Conversely, self-employment has decreased from 24.4% to 21.8%, reflecting a growing risk aversion as high costs and regulatory challenges deter individuals from initiating their own ventures.

Entrepreneurs have expressed concerns over complicated licensing regulations and the involvement of multiple government agencies, which inflate compliance costs.

A young graduate interviewed in the Nikkei report shared that he abandoned his restaurant plans due to overwhelming regulatory demands.

Experts also highlight that trade and industrial policies limiting access to cheaper imported inputs in the name of safeguarding domestic producers contribute to rising production costs without enhancing competitiveness, leaving local manufacturers protected yet unable to compete on a global scale, according to the report.