As the country grapples with dire economic conditions, it has been revealed that illegal trade is causing huge losses to Pakistan of Rs 8 trillion every year, making the existing financial crisis even worse.
According to the Pakistan Business Council (PBC), Pakistan has one of the “highest” illicit trade in Asia, amounting to $68 billion or 20% of the formal economy, equivalent to 85% of the tax revenue target for FY24. Is.
The forum warned that the existing illegal trade also has an adverse impact on the country’s economy and is also linked to criminal activities.
“Illicit trade undermines formal sector development and exploits labour,” the PBC said. He said that not only are such activities harmful for the environment but the production and trade of such products is also unsafe and substandard.
Blaming high taxes and ineffective enforcement as the reasons behind unrestricted illicit trade, the platform said the phenomenon has been allowed to exist because of a “poorly documented cash-based economy.”
The PBC also criticized the measures taken against trafficking and described them as “unsustainable”.
Calling for “permanent” fundamental reforms, the body provided a comprehensive framework to curb illicit trade and reduce its adverse effects on the economy.
According to PBC, the government should;
- Develop a strong political consensus to fight informality in the economy.
- Address abuses of the Afghan transit trade.
- Control and eliminate the flow of foreign currency funding smuggling and under-invoicing.
- Limit the use of cash to ensure transparency in transactions.
- Bring into tax net all points of sale through which illegal goods are sold.
It is noteworthy that Pakistan is facing a serious financial crisis due to declining foreign reserves and devaluation of the local currency.
The caretaker government had launched a nationwide crackdown to prevent illegal smuggling and hoarding of dollars and other foreign currencies.
Despite the rupee gaining significantly against the greenback, the country is still not out of the deep waters as its current account deficit (CAD) stands at a whopping $6.5 billion.
The signing of the IMF agreement on the $3 billion Stand-By Arrangement (SBA) program saw an improvement in foreign exchange reserves through July 2023, but the pace of foreign loans and grants has slowed in the last two months.
Officials expect the completion of the first review of the IMF program to boost dollar inflows from multilateral and bilateral lenders.