Illicit Trade Costs Pakistan Rs. 750 Billion Annually

Illicit trade is silently draining Pakistan’s economy. A new report by PRIME and TRACIT reveals that Pakistan loses Rs. 750 billion in tax revenue every year due to widespread smuggling and illegal manufacturing—especially in tobacco, petroleum, and pharmaceuticals. The broader informal economy, valued at $123 billion, contributes to a staggering Rs. 3.4 trillion in lost tax revenue annually.

TRACIT’s 2025 Global Illicit Trade Index ranks Pakistan 101st out of 158 countries, trailing behind regional peers like India (52nd) and Sri Lanka (73rd). Despite scoring well in trade and border management (75.4), Pakistan struggles with internal enforcement, scoring just 29.3 in managing sectoral illicit trade.

The reports recommend appointing a National Illicit Trade Coordinator and overhauling taxation policy to align duties with market realities. Excessive taxes have pushed formal players out—especially in tobacco and fuel.

Pakistan must also strengthen its Track and Trace system, improve inter-agency coordination, and expand Federal Board of Revenue (FBR)’s enforcement efforts.

Illicit trade isn’t just a tax problem—it’s a structural challenge. Fixing it requires political will, smarter policy, and tighter enforcement to protect markets, revenues, and economic stability.