Cash-strapped Pakistan is facing an “existential crisis” due to lack of tax collection and over dependence on loans, a report warned today.

According to a report by non-profit organisation Raftar, Pakistan’s economy continues to rely heavily on “commercial loans, concessionary donor loans and aid“.

The meager tax-to-GDP ratio of 9.4 per cent has led to a public debt of 17 trillion rupees (USD 163 billion), which shows a three-fold increase since 2008 for the $232 billion economy, with 44 per cent of tax revenue going toward interest payments.

Pakistan would continue to face “existential crisis” due to these problems, the report said.

People in Pakistan were unwilling to come forward and pay their share of revenues, forcing the government to rely on commercial loans and aid, it said.

Absence of income tax culture results in the increase of indirect taxes which are 68 per cent of tax revenue and are levied on fuel, food and electricity, it added.

The poor suffers as indirect taxes do not distinguish between rich and poor.

Non-payment of taxes leaves the government with little money to carry out development work as whatever revenue is generated through prevailing tax-system is spent as current expenditures.

Lack of revenue also forces the government to look towards the international donors like The International Monetary Fund (IMF) and The World Bank (WB) which inject money on their own terms, which further complicates the economy.

The report said that the Pakistan’s economy grew at 4.24 per cent during the 2014-2015 fiscal year, while government expects that it will grow by 5 per cent this year.

Raftar is a non-profit organistaion funded by UK’s Department for International Development (DFID).