Pakistan’s shadow economy accounts for 40% of GDP

shadow economy

As the key government and authorities figures have been drawing attention to the economic losses because of illegal trade, Pakistan’s shadow economy accounts for around 40 percent of GDP, whereas 6 percent of the gross domestic product (GDP) is being stolen yearly, as per a study compiled on tax evasion in five sectors, including tobacco, tea, tyres & auto lubricants, pharmaceuticals, and real estate.

IPSOS—a global leader in market research, conducted the study by the terms 6 percent of the GDP being stolen, a substantial amount of money that can be used to increase the living standards of the people by boosting Pakistan’s economy on a sound basis.

The annual volume of tax evasion in these five sectors is about Rs 310 billion, including Rs 80 billion from tobacco; Rs 35 billion from the illicit trade in tea; Rs 90 billion from tyres and lubricants; Rs 45 billion from medicines; and Rs 60 billion annually from the real estate sector, the study stated.

Read more: IMF tells Pakistan to lower budget deficit down to 4.9% of the GDP

Similarly, the report about the shadow economy was composed by a team of Harvard economists and officials of the senior commerce ministry unveiled that the top dozen commodities smuggled into the country make almost $3.3 billion yearly.

“A staggering 74% of cell phones sold in Pakistan were smuggled into the country. When it came to vehicles, 53% of diesel, 43% of engine oil, 40% of tyres, and 16% of auto parts sold in the country were smuggled,” the report unveils, saying that 20% of cigarettes in the country were smuggled, as was 23% of tea. Shockingly, law enforcement and regulatory bodies in the country have the power to seize only 5% of the goods smuggled into Pakistan.

Moreover, illicit trade and smuggling are a major hindrance not only to the national treasury but also to the organized sectors and industries like tyre manufacturers doing business legally in Pakistan. The annual consumption of tyres is 14 million and about 15%-18% of demand is fulfilled by domestic production, whereas over 50% of the demand is met through smuggled tyres.

“The government should take urgent steps to curb smuggling and import irregularities as, in the current scenario, Pakistan cannot afford a massive withdrawal of foreign exchange from the country in the form of imports or smuggling,” CEO of GTR Tyre, Hussain Kuli Khan, told the media persons.

Most Popular

To Top