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ISLAMABAD: Pakistan’s efforts to curb illicit trade are gaining importance as the government engages with an International Monetary Fund (IMF) mission over revenue targets and fiscal discipline for FY2026-27.
The government estimates that illicit trade across sectors including tobacco, petroleum, pharmaceuticals, tea and auto parts costs the country around Rs1 trillion annually.
The losses have become a major concern as Pakistan seeks to strengthen revenue collection and meet its IMF programme commitments.
The IMF has called for a broader tax base and stronger revenue collection mechanisms.
Pakistan has also committed to achieving a primary surplus of 2 per cent of GDP by 2027.
The Federal Board of Revenue (FBR) has set an enforcement-based revenue target of Rs778 billion for the next fiscal year.
The government has indicated that it plans to rely more heavily on enforcement rather than introducing new taxes to meet its fiscal commitments.
In this context, reducing illicit trade could provide an additional source of revenue.
The estimated Rs1 trillion annual loss represents a significant gap between potential and actual tax collection.
The tobacco sector highlights the scale of the challenge.
Illicit cigarettes account for more than 53 per cent of Pakistan’s cigarette market, according to the figures cited in the statement.
The illicit market costs the national exchequer an estimated Rs300 billion each year.
The FBR has continued enforcement operations against illegal tobacco manufacturers and their distribution networks.
These operations generated more than Rs50 billion in collections from the tobacco sector during the last fiscal year, according to the figures provided.
However, the continued size of the illicit market suggests that enforcement operations alone have not eliminated the problem.
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FBR operations this fiscal year have targeted illegal manufacturing facilities and supply chains.
Authorities have also intercepted raw materials and taken action against distribution networks.
The crackdown aims to bring businesses operating outside the formal tax system into compliance.
However, the statement argues that sustained enforcement will be necessary to prevent illicit products from returning to the market.
It also calls for consistent implementation of enforcement measures across relevant agencies.
Macroeconomics analyst Osama Siddiqui said enforcement-led revenue recovery could help Pakistan meet its fiscal targets without imposing additional taxes.
“The case for enforcement-led revenue recovery is strong and offers a practical route to meeting fiscal targets without additional taxation,” Siddiqui said.
He added that Pakistan would need reliable and consistent data to demonstrate the scale of illicit trade and measure the results of enforcement efforts.
According to Siddiqui, stronger coordination between federal and provincial authorities would also be necessary.
He identified monitoring at Green Leaf Threshing units, stricter enforcement of advance withholding tax and sustained provincial action against unstamped cigarettes as areas requiring attention.
Pakistan’s ability to recover revenue from illicit markets will remain closely linked to enforcement capacity, inter-agency coordination and the quality of data presented during IMF discussions.
