The ledger of loss

Every budget season, Pakistan performs the same ritual. Ministers huddle over revenue shortfalls. Businesses lobby against tax increases. Citizens brace for higher prices. International lenders demand fiscal discipline. The question is always the same: where will the money come from? Remarkably, the answer is never that perhaps the country should stop subsidising an industry that kills 448 Pakistanis every single day.

 The Global Adult Tobacco Survey, conducted by the Ministry of Health in partnership with WHO and the CDC Foundation, puts the scale of this beyond dispute. Tobacco causes approximately 164,000 deaths annually and inflicts economic losses of Rs 1,800 billion, roughly $6.6 billion, every year. That figure encompasses healthcare costs, lost productivity, premature mortality, disability, and the damage of second-hand smoke. It is seven times greater than what the tobacco industry contributes in taxes, which stood at Rs. 265 billion in 2025. Pakistan is collecting one rupee from tobacco while spending seven managing the consequences. This is not fiscal policy but a subsidised epidemic.

 The governance failure compounds the public health failure. Illegal cigarettes now account for more than half of Pakistan’s entire tobacco market. An Oxford Economics study published in April 2026 estimated that out of roughly 80 billion cigarettes consumed annually, nearly 43.5 billion were illegal. A separate survey by Stop Illegal Trade found that over 81 percent of cigarette brands sold in Pakistan carry no tax stamps whatsoever. Pakistan lost Rs. 325 billion in a single fiscal year from untaxed cigarettes alone. The formal sector, holding just 42 percent of the market, still contributes 98 percent of all tobacco tax revenue. The rest is a black hole of evasion, smuggling, and political protection.

 64 percent of that illicit trade originates domestically, primarily from production hubs in Khyber Pakhtunkhwa and Azad Kashmir, with the remaining 36 percent entering through smuggling routes via Afghanistan. This is not smuggling at the margins but an organised industry operating in plain sight, sustained by weak enforcement, regulatory capture, and a political economy that has never once treated tobacco control as a genuine national priority.

A country serious about economic reform must evaluate industries on their net impact, not their lobbying power or tax receipts alone. By that standard, the verdict on tobacco is not complicated, and the government itself has now put the numbers on record. What appears as an industry is in fact a liability, one of the most expensive burdens this country continues to carry. It is wrapped in attractive packaging, made easily accessible, and sold within the bounds of law, moving quietly through everyday life]Going up in a piff of smoke

The standard defence is familiar. Tobacco generates employment. It supports farmers. It contributes tax revenue. These claims are partially true and entirely beside the point. No serious accounting of an industry stops at its revenues while ignoring its costs. Tobacco kills up to half of its long-term users. It burdens public hospitals with cardiovascular disease, stroke, lung cancer, and chronic respiratory illness. It removes working-age adults from the labour force through disability and premature death. It imposes catastrophic financial shocks on households least able to absorb them. An industry that does all of this is not a contributor to the national economy. It is a cost the national economy has not yet had the honesty to fully calculate.

 The evidence that taxation reduces both consumption and health damage while simultaneously raising revenue is no longer theoretical in Pakistan. It is demonstrated. In 2023, a single tax increase reduced tobacco use by 19.2 percent while Federal Excise Duty collections rose 66 percent, from Rs 142 billion to Rs 237 billion. Yet FED rates have not increased since February 2023. Cigarettes have become more affordable in real terms as inflation erodes the value of frozen taxes. The WHO recommends that taxes constitute at least 75 percent of the retail price of tobacco products. The prescription is known. The will to apply it is absent.

 The GATS survey found that 1,200 Pakistani children aged six to fifteen begin smoking every day. Two in five smokers initiate tobacco use before the age of ten. The industry is not merely sustaining its current market. It is systematically recruiting the next generation of patients, a generation that will eventually overwhelm the same public hospitals Pakistan already cannot adequately fund.

Pakistan often speaks about its demographic dividend, its youthful population, its human capital potential. But demographic dividends depend on a healthy, productive workforce capable of sustaining growth across decades. A country cannot capitalise on that potential while accepting 164,000 preventable deaths annually as background noise. Nor can it claim fiscal seriousness while tolerating hundreds of billions in annual tax evasion from a sector the state already knows how to regulate, because it has done so successfully before.

The tobacco industry has survived every reform effort by ensuring the conversation stays focused on what it contributes. That framing has served it well. What it never invites scrutiny of is the other side of the ledger: the hospital beds, the lost wages, the shortened lives, the children recruited into addiction before they are old enough to make an informed choice, and the hundreds of billions in tax revenue that disappear annually into an illicit market the state has repeatedly failed to dismantle.

 A country serious about economic reform must evaluate industries on their net impact, not their lobbying power or tax receipts alone. By that standard, the verdict on tobacco is not complicated, and the government itself has now put the numbers on record. What appears as an industry is in fact a liability, one of the most expensive burdens this country continues to carry. It is wrapped in attractive packaging, made easily accessible, and sold within the bounds of law, moving quietly through everyday life.