A recent report by Karandaaz Pakistan has highlighted the potential of digital payments to significantly boost Pakistan’s economy. The report suggests that by reducing the informal economy and increasing financial inclusion, digital payments could lead to a 7% increase in GDP by 2025 and create millions of jobs.
Currently, a significant portion of Pakistan’s economy operates in the informal sector, relying heavily on cash transactions. This limits the government’s ability to collect taxes and regulate economic activity. By encouraging the adoption of digital payments, the government can bring a larger portion of the economy into the formal sector, leading to increased tax revenue and economic growth.
The report further highlights the high cost of managing cash. The State Bank of Pakistan (SBP) spends billions of rupees annually on printing, distributing, and replacing damaged currency notes. By promoting digital payments, the SBP can reduce these costs and allocate resources to other priorities.
Pakistan’s high Currency in Circulation (CiC) to bank deposit ratio, currently at 34%, compared to 17.8% in India and 16.7% in Bangladesh, indicates a reliance on cash-based transactions. This can hinder the central bank’s ability to effectively manage monetary policy and maintain price stability.
To address these challenges, Pakistan has been actively promoting digital financial services, including mobile banking and digital wallets. The launch of the Real-time Automated Clearing System (RAAST) in 2021 was a significant milestone in this regard. RAAST’s Person-to-Merchant (P2M) module, specifically designed for the retail sector, has the potential to revolutionize the way businesses operate and consumers make payments.
By embracing digital payments, Pakistan can unlock its economic potential, create jobs, and improve the lives of its citizens.
