Trillions lost to smuggling
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A new study has found that smuggling costs Pakistan's economy an astounding Rs3.4 trillion in losses, which is about 3.5% of GDP. The figure also represents about 26% of the government's tax revenue target for the ongoing fiscal year, meaning that the economy could, on paper, be put on track for success 'simply' by ending smuggling.
Unfortunately, ending smuggling is anything but simple. Even wealthy countries with well-documented economic systems often struggle to keep smuggling at low, nuisance levels. Meanwhile, Pakistan and its massive informal economy — estimated to be about one-third of the economy - are ripe for smugglers, especially those taking advantage of Afghan Transit Trade, which alone is credited with causing over Rs1 billion in annual losses, according to a report by the Policy Research Institute of Market Economy.
But smuggling is not just about government losses — the illegal trade can greatly impact the quality of prices available in the local market, while also discouraging the establishment and growth of local production.
This leads to the loss of potential jobs and long-term growth potential which, in turn, compounds efforts to fund improvements in health, education and other social services and infrastructure. The proliferation of smuggled goods also opens the door for counterfeiting, which is of grave concern in areas such as medicine, where almost half of some categories of drugs are allegedly counterfeit.
It is, therefore, unsurprising that Pakistan's subpar showing on the 2025 Illicit Trade Index — the worst in the region — also couples with a finding that we are generally among the worst economic performers among all developing economies. While improving enforcement is not a total solution, it is a start.
The government should also look into improving the archaic customs and shipping port infrastructure. Better risk profiling and scanning of containers would go a long way in cracking down on smuggling, as it would help keep the goods from ever entering the local market. The harder part of discouraging smuggling is encouraging a societal attitude shift to reject smuggled goods altogether.
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