Pakistan’s efforts to transition toward a cashless economy are at a pivotal juncture, with policymakers facing a clear choice: incentivise digital payments or penalise cash transactions. Recent estimates indicate that the country’s informal economy accounts for approximately 35 percent of its GDP—nearly $140 billion—highlighting the urgency of reform to bring economic activity into the formal financial system tribune.com.pkground.news.
An expert committee comprising representatives from both public and private sectors has submitted its recommendations to Prime Minister Shehbaz Sharif, outlining a dual “carrot and stick” approach. On the incentive side, the committee proposes reducing sales tax on digital transactions from 18 percent to 5 percent, introducing a three‑year tax‑audit moratorium for digital payments, and lifting customs duties on payment‑related hardware. Their analysis suggests that if these incentives are adopted, digital transaction volume could double within six months tribune.com.pkbrecorder.com.
The penalty approach, by contrast, involves imposing surcharges on cash payments to government bodies, utilities, and petrol stations. One notable proposal includes levying an additional fee—estimated at Rs 3 per litre, or roughly 1 percent—on cash fuel purchases at Pakistan’s 12,000 petrol stations. The committee projects that such surcharges could reduce cash usage by up to 2 percent of GDP, equivalent to Rs 2.6 trillion tribune.com.pk.
A key recommendation involves mandating the installation and usage of RAAST‑QR codes at all retail outlets and government payment points. With approximately 5 million outlets nationwide—compared to only about 2 million credit cards and 50,000 card readers—the committee emphasised that QR technology provides a more scalable solution. They believe that aggressive enforcement by district authorities could yield 1 million active RAAST‑QR terminals within a year tribune.com.pkbrecorder.com.
The committee also recommended that all government disbursements—such as those by Benazir Income Support Programme—move to digital platforms. RAAST‑QR codes would be mandated across all payment channels, and digital wallets would be issued to every recipient. If successful, this could add up to 20 million new bank accounts within 18 months brecorder.com.
The Federal Board of Revenue initially raised concerns that reducing tax on digital transactions might conflict with IMF conditions, but the IMF reportedly expressed no objection, shifting the decision back to FBR tribune.com.pk.
While the committee’s report indicates that penalties alone—such as restricting cash-on-delivery or raising petrol prices—may yield rapid gains, it also reflects on the limited success of punitive measures to date. Previous policies aimed at non‑filers—such as higher withholding tax and SIM blocking orders—failed to meaningfully broaden the tax base and instead became tools for raising revenue tribune.com.pkground.news.
Separately, industry leaders stress that speed and scale are crucial. Jazz CEO highlighted how digital payments create transactional trails that combat corruption and shrink the shadow economy—now estimated at over 35 percent of GDP thenews.com.pk. Meanwhile, the State Bank of Pakistan has simplified merchant account setup in collaboration with Karandaaz Pakistan, targeting a deadline of June 30, 2025, for robust QR-based systems brecorder.com.
With the federal budget presentation scheduled for June 10, Finance Minister Muhammad Aurangzeb will determine which path to take: lure users into the digital fold with incentives or compel them with surcharges and restrictions. One committee member cautioned that “it is up to the government whether to incentivise digital payments or punish cash users,” noting that incentive-based strategies have historically had stronger outcomes tribune.com.pkground.news.
As Pakistan stands at this crossroads, the impending budget will define whether the nation accelerates toward an inclusive, transparent fintech ecosystem—or doubles down on costlier enforcement measures that may fall short of their goals.
