A 2024 joint study of the International Labor Organization and the Small and Medium Enterprise Authority (SMEDA) estimated Pakistan's undocumented economy at $457 billion. While other South Asian nations, particularly Bangladesh and India, do include estimated undocumented GDP figures in their official GDP, Pakistan's official GDP figures do not include such estimates.
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| Pakistan's Total GDP, included Undocumented, Estimated at over $1 Trillion |
In 2023 when the ILO-SMEDA study was conducted, Pakistan's official GDP was $340 billion (34% less than the undocumented GDP), bringing the total real GDP for 2023 to $797 billion. Pakistan's official GDP figure for 2025-26 is projected to be $452 billion. Assuming that the undocumented GDP has grown at the same rate as the official GDP, the undocumented GDP today works out to $607 billion, bringing the total GDP (documented and undocumented) to over $1 trillion.
Being the largest employer, Pakistan's undocumented economy acts as a critical shock absorber for the labor force and sustains millions of low-income households. But it also restricts the government tax collection for education, healthcare and infrastructure. One might be tempted to force documentation of the entire economy as the Indian government attempted to do by demonetization, However, it will create a large unemployment problem as many small businesses are forced to close.
India is an example of what can go wrong in attempting to bring informal sector in the tax net too quickly. It has decimated the informal sector. But the Indian government continues to significantly overestimate its annual economic growth, particularly by misjudging the size and trajectory of the country's informal (undocumented) sector. Because of these estimation errors, researchers estimate that the absolute level of India's real GDP may be overstated by about 22%. This implies the average citizen's actual standard of living is lower than official data suggests.
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