Welfare Potential of Zakat: An Attempt to Estimate Economy wide Zakat Collection in Pakistan

In Pakistan, Naveed and Ali (2012) in a most recent study conclude that as many as 58.7 million people in Pakistan are living in multidimensional poverty with 46 percent of the rural population and 18 percent of the urban households falling below the poverty line. It is natural to ask what the government is doing for these poor people and how much it can expend to end extreme poverty in Pakistan. If we look at the fiscal position of the government, we see that Pakistan has a very low tax to GDP ratio, i.e. 9 percent. As a result of low tax to GDP ratio and high current expenditure, the government is suffering from a large budget deficit. Often, the development spending is curtailed to contain the large budget deficit due to high non-discretionary current expenditures in debt servicing and security expenditure. Expenditure on health and education is not even 5 percent of GDP in Pakistan. Due to such a low expenditure on developing human capital and maintaining health of the masses, poor people remain uneducated and unhealthy and hence they find it very difficult to get out of the poverty trap