The plight of Karachi

The Gul Plaza fire, with a big loss of lives and assets, has exposed in Karachi the failure in implementation of fire safety regulations and inadequate capacity for controlling a fire rapidly.

Karachi is, in fact, a ‘story’ of ‘ups’ and ‘downs’. It remains the primate city of Pakistan, with a population of 18.9 million in the urban area within Karachi Division, as per the Population Census of 2023.

Karachi was a small fishing town in 1901, with a population of only 136,000. It is now ranked as the twelfth largest city in the World. Next to Karachi is Lahore in Pakistan with a population of 13 million.

The population of Karachi continues to grow rapidly. According to the 2023 Population Census, the annual population growth rate in the city since the last census in 2017 has been 4 percent. The number of migrants into the city is estimated at 2.3 million.

The consequence of the high rate of population growth has been a quantum jump in the population density within the city. According to the 2023 Census, the density is 5778 persons per square kilometer. This is substantially higher than the density in the two other large cities of Lahore and Faisalabad, of 1947 and 906, respectively, per sq km.

The fundamental implication of the large population and high density is extreme pressure on municipal services, especially urban transport and road network, water supply and sanitation, control over crime and so on.

The high population density is also attributable to the extremely high presence of high-rise buildings in the city. According to the Economic Census of 2024-25, the number of high-rise buildings is 67,575 compared to 11,243 in Lahore and, 1517 in Faisalabad.

The population pressure on the city is clearly due to its pivotal role in the national economy. With a population share of 7.5 percent in the national population, the city contributes over 15 percent of the national GDP, with high shares especially in large-scale manufacturing and finance. As the port city, it handles the bulk of international trade in goods and services.

The inevitable consequence has been the continued inflow of migrants into the city from other locations in Pakistan, in search of job opportunities. Over 60 percent of the migrants are from other provinces of Pakistan and 40 percent from the rest of Sindh province.

The national role that the city plays in economic activities has implied an extremely high contribution to national tax revenues. Import duty and import sales tax revenues accrue largely from the Karachi ports.

Beyond the revenues linked to imports, the city makes an extraordinary contribution to other tax revenues. It is estimated that with only a population share of 7.5 percent, it contributed 43 percent to the national income tax revenues collected by FBR in 2023-24. Further, the share of Karachi in the domestic sales tax and the excise duty is 25 percent and 27 percent, respectively.

The fast growth in population of over 4 percent has contributed to deterioration in key economic and social indicators. The unemployment rate in 2023 was as high as 13.6 percent. The literacy rate is 72.8 percent, which is lower than the rate in other cities, like Gujranwala and Rawalpindi.

The number of ‘idle youth’ is large at 1.8 million. This implies that over 52 percent of the youth population in the city is either not in the education system or in the labour force. This has contributed to a high growth rate in the incidence of crime annually of 5.5 percent. In particular, vehicle theft has increased annually by as much as 12.5 percent.

The percentage of out-of-school children is also relatively high, at 38.1 percent compared to 26.4 percent in Lahore and 20.2 percent in Gujranwala. Given the higher presence of migrants and the unemployed, the level of home ownership is also lower. It stands at 60 percent of the housing units, compared to 76.5 percent in Lahore and 85.5 percent in Faisalabad.

The plight of Karachi is also vividly highlighted by its position in international rankings of cities. The Oxford Economics Global City Index ranks cities globally on the basis of 27 indicators. These are related to structure and growth, human capital, business climate, quality of life with access to amenities, climate change related issues and governance.

The ranking of Karachi is 897th out of the 1000 cities included in the Index. Karachi is also ranked as the most polluted city in the world.

Clearly, the time has come for tackling the problems related to the provision of basic municipal services in the city of Karachi on an emergency basis. This will require a quantum jump in expenditures on sizeable expansion in water supply, development of the road network in the city, better public urban transport and access to gas.

The capacity of the Karachi Metropolitan Corporation (KMC) and Karachi Development Authority (KDA) needs to be rapidly expanded. The size of the budget of KMC is Rs 55 billion, with Rs 20 billion for development projects and Rs 31 billion for salaries and administrative costs. The total revenues are just over Rs 55 billion.

The extremely limited size of the KMC budget is clearly demonstrated by the fact that it is only 0.3 percent of the total income generated in the city. There is a need for a quantum jump in development spending in the city.

There are two sources of revenue which must be earmarked for allocation to the KMC. The first is the federal grant in lieu of abolition of octroi, a local tax, to the province of Sindh. This is equivalent to 0.66 percent of the divisible pool of federal taxes. Accordingly, the amount transferred in 2024-25 was Rs 77 billion. This should be shared among the urban local governments on the basis of the respective share at the time of abolition of the octroi tax, which used to be the principal source of revenue of KMC.

The other potential source is the sharing in the Infrastructure Development Cess of the Sindh government, which yielded Rs 170 billion in 2024-25. This is a levy in the form of a Cess on goods entering or leaving the province from outside the country through air, sea, for development and maintenance of infrastructure in the province. Clearly, with the port in Karachi part of these revenues ought to be transferred to KMC for maintenance and development of the road network from the ports to the points of exit from Sindh.

The KMC should also focus on the development of its own revenue sources, especially the urban immoveable property tax. This is a progressive tax and can be a buoyant source of revenue. The minimum potential revenue from this tax is Rs 110 billion in Karachi.

There is a sense of nostalgia about high quality of living conditions in Karachi in the early 70s when the city was known as the ‘city of lights’. There was a beautiful seafront and the central city was less dense and relatively better maintained. The time has come for a declaration of an emergency and for large-scale measures to rehabilitate Karachi, the primate city of Pakistan.

Copyright Business Recorder, 2026