A new report by the Policy Research Institute of Market Economy (PRIME) has revealed that Pakistan is losing Rs3.4 trillion every year due to illicit trade, amounting to 26% of the country’s annual tax target. The study highlights how smuggling, tax evasion, and counterfeiting have entrenched themselves across key sectors, undermining formal businesses and depleting government revenues.
One of the most significant contributors to these losses is the misuse of the Afghan Transit Trade facility, which alone accounts for an estimated Rs1 trillion in lost revenues. Other major areas of concern include the smuggling of tobacco products, causing over Rs300 billion in annual losses, and the illicit trade in oil, resulting in a Rs270 billion shortfall.
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The report also pointed to outdated border control infrastructure, weak customs automation, and ineffective enforcement as major reasons behind the rampant smuggling. With only 19 out of 264 cigarette brands complying with the Track and Trace System, tax evasion in the tobacco industry has worsened since excise duty hikes in 2023.
Pakistan’s poor standing in the 2025 Illicit Trade Index, ranking 101 out of 158 countries, underlines systemic weaknesses in trade governance and enforcement. PRIME called for urgent reforms to modernize customs infrastructure, simplify tariff regimes, and strengthen domestic enforcement to curb the growing informal economy.
