Pakistan’s most expensive economic problem is not debt, taxation, or even corruption in the conventional sense. It is a political economy where access to the state has become one of the country’s most profitable businesses.

In the earlier article, I estimated that elite capture costs Pakistan roughly Rs 6.7 trillion annually — equivalent to about 5.8 percent of GDP, or about $25 billion in 2024-25. This was the first comparable estimate since the 2020 United Nations Development Programme (UNDP) study on elite privilege, which attempted to quantify the benefits received by powerful groups using available official data.

My estimate attracted attention because, unlike the UNDP report, it started with officially documented fiscal costs and then examined additional channels through which state-created advantages transfer resources to privileged groups. It also included: electricity-sector capacity payments, losses of state-owned enterprises and other identifiable drains on public resources. But the more important conclusion was not the number itself because this figure captures only the part of elite capture that appears in published or official accounts.

Elite capture does not require direct corruption in every case. It can occur whenever political influence allows particular groups to obtain economic advantages unavailable in a competitive market. Many of the largest transfers of wealth in Pakistan never appear in these documents. They occur through privileged access to land, regulatory protection, restricted competition, under-taxation of assets and state-created economic advantages. These channels are harder to measure, but they may be far larger in aggregate. The Rs 6.7 trillion estimate should therefore be viewed not as the total cost of elite capture, but as its minimum measurable cost. The question is how much larger the real burden might be.

Understanding the Rs 6.7 trillion floor

The original estimate was deliberately conservative because its main components could be directly linked to official data. Federal tax expenditures amounted to approximately Rs 2.35 trillion in FY2024-25. Electricity-sector capacity payments reached roughly Rs 2.14 trillion. Losses from state-owned enterprises approached Rs 833 billion. Together with other identifiable fiscal leakages, these channels generated an annual burden of approximately Rs 6.7 trillion.

What is striking is not only the size of the figure. It is that none of these categories capture some of the largest sources of elite wealth creation in Pakistan: asset transfers and regulatory privilege or arguably, abuse of authority.

Tax expenditures represent benefits already visible in fiscal accounts. Capacity payments represent guaranteed returns embedded in contracts. SOE losses represent inefficiencies ultimately financed by taxpayers. But they do not capture what happens when land is allocated below market value, when zoning decisions create windfall gains, when protected industries charge consumers above competitive prices, or when regulations are designed in ways that limit competition. The gains are concentrated among beneficiaries, while the costs are spread across society.

A framework for estimating the hidden burden

Elite capture in Pakistan operates through four broad channels.

The first consists of direct fiscal privileges visible in government accounts. These include tax exemptions, subsidies, guarantees and fiscal losses. This category is largely captured in the Rs 6.7 trillion estimate.

The second consists of contracting rents — value extracted through public procurement when contracts are awarded, priced or modified without the transparency and competitive pressure needed to protect the public interest.

The third consists of wealth transfers through assets, especially land and real estate. These rarely appear in annual budgets, yet they often involve some of the largest transfers of economic value in the country.

The fourth consists of market-power rents, where businesses earn extraordinary returns not because they are more productive or innovative, but because competition is restricted through policy, regulation or political influence.

Together, these four channels describe different ways of achieving the same outcome: converting public authority into private wealth.

A tax exemption transfers value through the fiscal system. Procurement transfers value through public spending itself. Cheap land transfers value through public assets. Regulatory protection transfers value through higher prices and restricted competition. The mechanism changes, but the result does not. Wealth that could have accrued to the public is redirected to a relatively small group of beneficiaries. The Rs 6.7 trillion estimate captures much of the first category because it is visible in official accounts. The larger challenge is that the remaining channels operate largely outside them. They leave fewer traces in budgets, audits and financial statements, even though their economic impact may be just as........

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