Pakistan’s ambition to transition toward a cashless economy appears to be losing pace, as fewer than 700,000 retailers nationwide have integrated any form of digital payment solution, according to the latest official data. The figures underline the challenges the government faces in modernizing the country’s largely cash-dependent retail sector, despite Prime Minister Shehbaz Sharif’s renewed push for financial digitalization.
Retailers in Pakistan represent one of the largest sources of cash circulation, yet digital adoption in this segment remains limited. As of September, less than 700,000 retailers across the country had linked with digital payment systems, with only around 39,000 based in the capital city, Islamabad. The numbers fall far short of the government’s target of connecting at least 2 million merchants to digital platforms by June next year. Officials admit that resistance from traders is making the goal increasingly difficult to achieve.
Prime Minister Sharif recently chaired a high-level briefing to review the progress of his cashless economy initiative. During the meeting, he stressed that moving away from a cash-based economy is critical for sustainable growth, improved governance, and transparency in financial transactions. He directed the relevant ministries and financial authorities to expand awareness campaigns, particularly in rural areas, to accelerate the adoption of digital payment solutions.
Minister of State for Finance Bilal Azhar Kayani has been tasked with leading and monitoring the implementation of this nationwide digital payments drive. However, the initiative faces structural challenges, as the country’s currency in circulation has continued to rise, reaching 34 percent as of June 2025. A recent mini-budget proposal to increase the withholding tax on cash withdrawals to 1.5 percent may further encourage people to hold cash, instead of promoting digital usage.
Resistance from traders has been a persistent obstacle in Pakistan’s economic reforms. Many in the trading community have resisted formalization and tax registration, hampering efforts to expand the documented economy. The government has somewhat softened its approach, prioritizing digital linkage over direct taxation to improve transaction traceability and boost indirect tax collection through sales monitoring.
This resistance has had a visible fiscal impact. Tax authorities previously reported that retailers paid Rs. 693 billion in income tax during the last fiscal year, but the Federal Board of Revenue (FBR) Chairman later clarified that the actual figure was just Rs. 166 billion. In contrast, the salaried class contributed Rs. 606 billion, roughly 265 percent more than traders. The imbalance continues to place a disproportionate burden on salaried workers and the manufacturing sector, while a large segment of retail activity remains untaxed.
The government’s broader financial inclusion agenda, however, continues to progress in other areas. Pakistan has witnessed a steady rise in digital banking users, with more citizens accessing mobile and online financial services. The prime minister recently highlighted successful initiatives such as the disbursement of financial aid through digital wallets under the Benazir Income Support Programme (BISP), which marks a significant milestone in digitizing welfare payments.
Despite these advancements, experts warn that achieving a truly cashless economy will require stronger enforcement measures, better incentives for merchants, and enhanced infrastructure for digital transactions. Without the active participation of traders—the backbone of Pakistan’s retail economy—the government’s cashless vision may struggle to reach its full potential.
Prime Minister Sharif has reaffirmed his administration’s commitment to advancing digital transformation and financial inclusion, urging all stakeholders to accelerate efforts. While the goal of connecting two million retailers by mid-2026 remains ambitious, policymakers hope that continued awareness, technological innovation, and regulatory support will pave the way for a more transparent and digitally empowered economy.
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