MULTAN: Pakistan’s economy may face a new jolt in 2025 as there is a growing possibility of a rise in smuggling activities. Economists are specially. worried about Afghanistan’s suspension of aid by the new U.S. administration that may trigger an increase in goods smuggling between Pakistan and Afghanistan.
Market experts opine that illegal. inflow of U.S. dollars into Afghanistan is the main issue. “This will starve Pakistan of dollars and put further pressure on the rupee,” said a currency dealer Atif Ali.
Pakistan is already a victim of massive inflation, escalating debt, and low growth; another major area of concern includes the increasing ring of smuggling across the country at an estimated level of billions. It ranges from fuel to even the latest Smartphones, leaving not only a local business harmed but also keeping away much revenue that the government can generate with its parallel economy competing with that of the country’s formal sectors.
A report by the Small and Medium Enterprises Development Authority and the International Labour Organization puts this underground economy at around $457 billion, or 40% of Pakistan’s GDP. Also, it is estimated that about 72.5% of the non-agricultural workforce is in this informal sector.
Though Pakistan and Afghanistan have long histories of smuggling, most have been non-food items. The experts, however, are perturbed by food items like wheat, sugar, and chicken appearing on the smuggling list soon. “If such items start filtering into Afghanistan illicitly, Pakistans will be held accountable,” argued Jellani Khan, food wholesaler. “We do need a right policy, and especially for control of dollar smuggling.”
Major commodities such as wheat, sugar, urea, and petrol are smuggled as the prices vary and subsidies in neighboring countries exist. Smuggling usually takes place across porous borders with Afghanistan and Iran.
Pakistan faces monumental challenges with smuggling that go beyond Afghanistan. Different reasons exist for smuggling into and out of Pakistan, including price differences, lack of taxes, and regulation loopholes. Such goods are usually sold at a cheap price, causing unfair competition for domestic manufacturers following regulations. This may adversely affect local production, jobs, and economic stability.
According to the Federal Board of Revenue, Pakistan loses up to $5 billion annually partly because nearly 35% of consumer goods are smuggled or untaxed. Such unfair market conditions discourage foreign investment.
Pakistan’s government responded by increasing the crackdown on smuggling. In 2023, the FIA initiated investigations on money laundering and currency hoarding. The government also increased manning at the border crossing to monitor and inspect goods.
Experts however stress that such efforts need to be sustained and strengthened to have any effect. “We need immediate surveillance to prevent the illegal flow of dollars and essential goods into Afghanistan,” said Bilal Hanif, a businessman from Lahore. “Pakistan cannot afford another economic blow, as it is already struggling with high inflation.”
With inflation continuing to affect the country, Pakistan’s economy faces critical challenges ahead, and smuggling could become a bigger issue in 2025.
