Pakistan’s ambitious drive toward a cashless economy appears to be slowing down, as less than 700,000 retailers across the country have adopted any form of digital payment solution, according to official figures presented to Prime Minister Shehbaz Sharif. Retailers, who are among the largest handlers of cash in the economy, have been slow to embrace digital payment systems despite government incentives and awareness campaigns.
During a recent high-level meeting chaired by Prime Minister Sharif, officials briefed him on the status of the initiative, revealing that only a fraction of the target had been achieved. Of the retailers linked to digital payment systems, just 39,000 are based in Islamabad. The prime minister has set an ambitious goal of connecting at least 2 million merchants with digital payment modes by June next year, though the target appears challenging given strong resistance from sections of the trading community.
The prime minister underscored that Pakistan’s transition toward a cashless economy is essential for sustainable development, economic transparency, and improved governance. He directed authorities to intensify awareness campaigns, particularly in rural and semi-urban areas, to promote digital financial adoption and reduce dependence on physical cash. The initiative is being overseen by Minister of State for Finance Bilal Azhar Kayani.
Despite policy efforts, Pakistan’s currency in circulation continues to rise, standing at 34 percent as of June 2025. The government’s mini-budget proposal to raise the withholding tax on cash withdrawals to 1.5 percent could unintentionally encourage further cash hoarding. Traders, historically resistant to formalisation, remain the weakest link in the chain, avoiding digital platforms and tax registration despite multiple reform efforts.
According to the Federal Board of Revenue (FBR), traders paid Rs166 billion in income tax last year—far less than the Rs693 billion figure previously suggested. In comparison, the salaried class paid Rs606 billion, which is nearly three times the amount contributed by traders. This imbalance continues to strain the formal economy, pushing the government to integrate retailers into digital channels as a means of monitoring sales and ensuring fair tax contribution.
To encourage digital adoption, the government has linked new business licences to digital payment registration and integrated scannable QR codes into mobile applications for accessing public services in Islamabad. Payments for utilities such as electricity and gas bills can now be made through digital platforms, helping facilitate billions of rupees in transactions.
In contrast to sluggish merchant adoption, Pakistan has exceeded its target for digital service users. Against a goal of 105 million users by December 2025, the country already has 112 million active users of digital banking and financial services. Prime Minister Sharif highlighted that digitalisation remains central to his government’s economic reform agenda. He cited recent progress such as digital transfers under the Benazir Income Support Programme (BISP), where financial assistance was successfully distributed through digital wallets during Ramadan for the first time.
The government aims to complete financial inclusion for over 68 percent of the population by the end of this year and 70 percent by December 2026. It is also working to enhance government-to-private-person digital payments by 60 percent, though only 35 percent of such transactions are currently digital. To support these goals, new digital banks—including Raqami Digital Bank—are being licensed across the country to expand access to financial services.
While the path to a cashless economy remains challenging, officials remain optimistic that ongoing reforms, improved infrastructure, and rising digital adoption among consumers will help Pakistan make measurable progress toward a transparent, inclusive, and tech-driven financial future.
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