LAHORE: As Pakistan engages with an International Monetary Fund mission over revenue targets and fiscal discipline for FY2026-27, the huge amount lost annually to illicit trade have come into sharper focus as one of the most immediate and credible sources of revenue recovery available to the government.
The IMF, which has urged Pakistan to expand its tax base and strengthen revenue collection mechanisms, has set a primary surplus target of 2 per cent of GDP by 2027. The FBR is targeting Rs 778 billion in enforcement-based revenue for the next fiscal year, with the government signalling it will rely on enforcement measures rather than new taxation to meet its commitments. In this context, the estimated Rs1,000 billion lost annually to illicit trade across tobacco, petroleum, pharmaceuticals, tea, and auto parts represents a direct obstacle to meeting IMF programme targets, the sources said.
The tobacco sector alone illustrates the scale of the opportunity being missed. Illicit cigarettes account for over 53 per cent of Pakistan’s total cigarette market, costing the exchequer an estimated Rs300 billion annually. Despite ongoing enforcement operations that have yielded over Rs50 billion in collections from the tobacco sector in the last fiscal year, illicit products continue to dominate the market, pointing to structural gaps that periodic raids alone cannot close, the sources added.
“The case for enforcement-led revenue recovery is strong and offers a practical route to meeting fiscal targets without additional taxation. To carry weight in IMF discussions, however, these efforts must be supported by clear, consistent data that demonstrates the true scale of the problem and the results being achieved,” said Osama Siddiqui, a macroeconomics analyst.
Closing the gap, he added, requires coordinated action across federal and provincial levels, including effective monitoring at Green Leaf Threshing units, stricter advance withholding tax enforcement, and sustained provincial drives against unstamped cigarettes.
Copyright Business Recorder, 2026
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