At that time wildly popular Suzuki Margalla 1300cc was discontinued and Suzuki Baleno 1300cc and 1600cc was introduced which had a distributorless ignition and other new technologies which were too advanced for technologically-conservative Pakistani society.

Baleno did fine though not market-dominating and Suzuki died out in 1300cc with Liana.
And Suzuki’s failure helped Honda City because of similar pricing (only few percent more expensive).

They had the market to themselves as Civic was not selling well at all and all the Honda’s sales was City. But now their competition is Yaris and it is difficult to say no to a Toyota in that upper middle class executive market.

Pakistani people had already had the taste of 6th gen City in the form of used JDM Honda Grace. It is not visually appealing or distinct from the previous City (what most buyers look for) and when introduced it will become more expensive for no consumer-perceived benefit.

Toyota continued its ancient 1300cc engine and gear from 1st gen Vitz in the XLi and GLi till now but for Yaris they have included a modern technology engine and gear setup. Honda can’t compete with that engine from 2008.

It is better either they introduce the latest City (7th gen) or entirely exit this market sector. They can continue to sell BR-V and Civic.