In Pakistan, the informal sector constitutes 72.5% of non-agricultural employment (Labour Force Survey 2020–21), with rural areas at 76.2% and urban areas at 68.5%. Managing this unofficial economy presents a multitude of complicated issues: poor documentation, absent record-keeping, and restricted access to financial services constrain both tax enforcement and workers’ ability to expand operations or accumulate savings.
Pakistan needs a diversified strategy to address informal economy regulation—anchored in data-driven policy, financial inclusion, simplified tax procedures, and strengthened social protections. The complexity of existing regulatory frameworks actively discourages informal enterprises from transitioning to the formal economy. Provision of access to formal financial services, including microcredit and savings instruments, is a critical lever for incentivizing this shift.
Read the full article on Business Recorder (Published 21 October 2023).