As 2025 came to an end, a rare and troubling consensus emerged among small and medium traders across Pakistan. Business owners, shopkeepers, and market associations described the year not just as difficult, but as the worst they had ever experienced. According to traders, 2025 was marked by closures, shrinking markets, falling investment, and rising unemployment. Inflation stayed high, consumer spending collapsed, and confidence disappeared. For many, survival replaced growth as the only goal.
This assessment was formally captured in a detailed report by the All Karachi Traders Alliance (AKTA). The report did not focus on abstract economic theory. Instead, it described what traders faced every day: empty shops, unpaid salaries, rising bills, and customers who could no longer afford basic goods. While official statements often highlighted avoided default and stock market gains, traders argued that these claims did not match reality on the ground. The question that now matters is not only how 2025 became such a damaging year, but why no clear path to recovery appears for 2026.
Why Did Business Activity Collapse Across Markets?
One of the most striking findings of the traders’ report is how weak business activity remained throughout the year. According to AKTA, overall commercial activity stayed below 60 percent for most of 2025. Even during traditional peak seasons, markets did not see the crowds or sales volumes that once defined them.
Several factors came together to cause this collapse. Political instability created uncertainty, making both buyers and sellers cautious. Frequent changes in policies, mixed economic signals, and lack of long-term planning made it difficult for businesses to plan ahead. Traders say that when people fear what tomorrow may bring, they stop spending today.
Inflation played a central role. Prices of electricity, gas, fuel, and imported goods continued to rise. For traders, this meant higher operating costs. For consumers, it meant less money left after meeting basic needs. Essential items such as pulses, cooking oil, milk, vegetables, and meat became harder to afford for poor and middle-income families. When households struggle to buy food, spending on other goods disappears.
The report also highlights excessive taxation, especially indirect taxes. These taxes do not consider income levels and hit workers, laborers, and small traders the hardest. According to AKTA, this tax burden pushed many into hardship and forced businesses to cut costs in the only way they could: by reducing staff or closing altogether.
As markets slowed, losses became widespread. The report estimates that around 80 percent of traders suffered financial losses in 2025. Many could not pay shop rent, utility bills, or employee salaries. Rising rents and electricity charges became impossible to manage when sales kept falling. Over time, what began as a slowdown turned into a full business shutdown for many.
How Closures and Unemployment Fed Each Other
The traders’ report describes 2025 as a “year of closures,” and this phrase captures one of the most damaging trends of the year. Industries, factories, and small business units shut down at alarming rates. Each closure meant not just the loss of one business, but the loss of many jobs tied to it.
According to AKTA, more than half of workers connected to the trading and small business sector lost their jobs. For those who remained employed, wages were often delayed or reduced. Unemployment spread quietly but steadily, affecting households that already faced rising prices.
This job loss had a direct impact on markets. When people lose income, they reduce spending to essentials only. This further reduced demand, hurting remaining businesses and pushing them closer to closure. In this way, unemployment and business failure fed each other in a cycle that became difficult to break.
The report also links rising unemployment to increased crime. With fewer job opportunities and higher living costs, some people turned to illegal activities to survive. Traders reported growing insecurity, especially in urban centers, which added another layer of fear and cost to running a business.
Investor confidence also collapsed. Local investors moved their money abroad, seeking stability and safety. This capital flight reduced available investment inside the country, further weakening industrial and commercial activity. Traders argue that confidence cannot be restored through slogans or short-term claims. It requires stability, protection, and a clear economic direction, all of which were missing in 2025.
Why Official Economic Claims Failed to Convince Traders
Throughout 2025, government officials repeatedly stated that the economy had avoided default and was on a path to stability. The stock market reaching record highs was often presented as proof of recovery. For traders, these claims felt disconnected from reality.
The AKTA report strongly criticizes what it calls artificial and misleading economic indicators. Traders argue that stock market performance benefits a narrow segment and does not reflect the condition of trade, industry, or employment. While share prices rose, factories closed and shops emptied. For those running small businesses, this contrast felt almost insulting.
The report also questions the effectiveness of governance. According to AKTA, government institutions performed poorly throughout the year. Despite dozens of foreign visits aimed at attracting investment, traders say no meaningful foreign investment reached the ground. At the same time, domestic investors continued to move their funds abroad.
Price control mechanisms also failed. Traders accuse agencies responsible for monitoring prices of entering informal arrangements with profiteers instead of stopping artificial price hikes. As a result, prices continued to rise without effective checks, hurting consumers and businesses alike.
Another major criticism is the absence of a clear economic strategy. The report notes that no serious or visible plan was presented to revive trade, support industry, or protect small businesses. Instead, short-term measures and public statements replaced structural reform. For traders facing daily losses, words without action offered little comfort.
Why Karachi Became a Symbol of Deeper Economic Breakdown
Karachi, the country’s largest city and economic hub, features prominently in the traders’ assessment. The AKTA report paints a bleak picture of a city struggling on multiple fronts at once.
According to traders, Karachi increasingly felt like a city controlled by mafias. Extortion threats against traders and industrialists remained a constant concern. Insecurity raised the cost of doing business and discouraged investment. For many, operating a shop or factory required not just capital, but daily risk management.
Beyond security, Karachi continued to suffer from basic governance failures. Traders cited inflation, unemployment, encroachments, land grabbing, traffic congestion, water shortages, and poor municipal services as daily obstacles. These problems increased operating costs and reduced productivity, making business survival even harder.
The report is also critical of the Sindh government, stating that governance remained weak throughout 2025. According to AKTA, corruption and inefficiency prevented improvements in any major sector. Agencies meant to protect consumers and traders failed to act independently, allowing artificial inflation to spread across markets.
Karachi’s condition matters because it reflects the broader economy. When the country’s main commercial center struggles, the effects spread nationwide. The decline in trade activity in Karachi signals deeper structural problems that cannot be fixed through temporary measures.
What Does the Traders’ Warning Mean for 2026?
Perhaps the most alarming part of the traders’ report is its outlook for the future. AKTA warns that no signs of economic recovery are visible for 2026. This warning is not based on speculation, but on trends that remained unchanged throughout 2025.
Inflation remains high. Energy costs continue to rise. Tax pressure has not eased. Investor confidence is weak. Without policy shifts, traders fear that closures and unemployment will continue. For small businesses already on the edge, another year like 2025 may not be survivable.
The report challenges policymakers to look beyond headline numbers and listen to those who operate at street level. Traders are not asking for special treatment. They are asking for stability, fair taxation, controlled prices, and basic security. Without these, markets cannot recover.
The story of 2025 is not only about one bad year. It is about the widening gap between official narratives and lived economic reality. If that gap continues into 2026, the damage may deepen further. The warning from traders is clear: ignoring the ground reality today risks a longer and more painful crisis tomorrow.
