An increase in the rate of urbanization is linked with an expanding economy. In Pakistan, 95% of the federal tax revenue is collected from the residents of the major metropolitan cities like Karachi, Lahore, and Islamabad. Karachi contributes 55% to the urban economy, followed by Islamabad at 16%, and Lahore at 15%. In total, Karachi contributes almost 25% to the national GDP.
The urban economy in total generates about 55% of the country’s GDP. Moreover, the annual growth rate of the urban economy stands at 4.5%, compared to less than 2.5% for rural areas. A regional comparison of Pakistan’s urban economy to India and Indonesia shows that the country needs to invest in the development of its urban areas. India’s urban areas are 10% smaller than Pakistan’s, however, their urban areas generate 58% of the country’s total GDP.
Pakistan has been one of the fastest urbanizing regions in South Asia. The expansion of cities and the establishment of new ones imply that the size of the country’s urban economy needs to increase simultaneously.