Raast to reform: Digitizing Pakistan's economy
Digital payment systems are rapidly transforming economies across the globe by enhancing transparency, reducing informality, accelerating the velocity of money, and spurring inclusive economic growth. In this context, Pakistan's digital payment platform, Raast, has rapidly emerged as a cornerstone of the country's digital financial infrastructure.
With over 43 million consumers, 841,000 merchants, and 36 banks onboarded, Raast now processes more than 4.5 million daily transactions. Its adoption has seen exponential growth, with transaction volumes surging to 371 million and values reaching PKR 8.5 trillion in Q1 FY25 alone. Unlike costly international card networks, Raast offers zero-cost, QR-code, and IBAN/mobile-based transactions backed by national scalability and full government integration. Since its inception, Raast has processed over PKR 34 trillion, significantly reducing reliance on cash and foreign payment networks.
However, despite Raast's technical success, Pakistan continues to lag in overall digital payment adoption. This gap stems from a combination of structural and behavioural barriers. Structurally, the country suffers from low levels of digital and financial literacy, weak incentives for merchants, and fragmented onboarding processes.
Behaviourally, Pakistan's heavy reliance on cash transactions presents a significant obstacle to economic progress—perpetuating informality, limiting tax revenues, and stifling investment potential. Currently, 25 percent of the country's total money supply—over PKR 9 trillion—is in cash circulation, far above the regional average of approximately 6.5 percent.
This cash dominance contributes to one of the lowest tax-to-GDP ratios (10 percent) and one of the largest informal sectors (57 percent) among peer economies like India and Brazil. These challenges are further compounded by policy inertia and institutional hesitation, primarily driven by IMF-imposed revenue targets.
India's remarkable success with its Unified Payments Interface (UPI) offers valuable lessons and actionable frameworks that Pakistan can adapt by leveraging Raast. Since its launch in 2016, UPI has reshaped India's financial landscape—processing an astounding USD 5.8 trillion by 2024, generating estimated savings of USD 109 billion and accounting for 83 percent of all digital payments in the country. This transformation was driven by strategic government spending, regulatory incentives, and tax benefits targeted at merchants, consumers, and financial institutions. As a result, cash transactions in India declined significantly, with the cash-to-GDP ratio falling from 14 percent to 11.5 percent, signaling a significant shift toward formal and traceable economic activity.
Likewise, Pakistan can take targeted steps such as enforcing digital payment thresholds, offering tax liability reductions for merchants using digital platforms, and reducing withholding tax on digital transactions between suppliers and retailers. A Raast-based payment ecosystem offers zero-cost transactions, nationwide scalability, universal interoperability, and full government integration—unlike traditional card-based systems, which are costly, urban-centric, and result in significant foreign exchange outflows. By localizing payment infrastructure, Raast helps conserve foreign exchange, expand financial inclusion, and foster sustainable digital infrastructure.
Pakistan must also consider disincentivizing cash usage to accelerate adoption by introducing incremental withholding taxes on cash payments. Furthermore, promoting widespread integration of merchants with the FBR's e-invoicing and digital POS systems could create a strong multiplier effect, enhancing transparency and fiscal accountability.
Significantly, the revenue streams targeted for relaxation contribute minimally to overall tax collections. Thus, offering these incentives would not substantially impact fiscal revenues nor violate IMF conditionalities. On the contrary, such reforms could expand the economic pie by reducing informality and increasing the volume of digital transactions.
Estimates suggest Raast could generate over PKR 1.1 trillion in annual economic benefits—partly through tax savings for the government but primarily through broader multiplier effects and reductions in transaction costs across the economy.
The economic rationale is compelling: transitioning toward a cashless economy, as demonstrated by India's experience, significantly boosts the velocity of money. Faster circulation enhances consumption, stimulates business expansion, and strengthens economic dynamism—ultimately increasing tax revenue and supporting long-term growth.
In essence, Raast—supported by innovative policy interventions and strategic incentives—has the potential to reshape Pakistan's economic landscape. Pakistan can unlock the true promise of digital financial inclusion by enabling businesses and consumers to shift away from cash, reducing informality, and enhancing transparency. With a clear understanding that short-term tax relaxations can yield long-term economic dividends, the country is well-positioned to negotiate pragmatic reforms and fully realize Raast's transformative potential.
Copyright Business Recorder, 2025
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
8 hours ago
- Express Tribune
Two-day mango festival opens in Lahore
Listen to article The Punjab Tourism Department inaugurated the much-anticipated Mango Festival 2025 in Lahore showcasing over 50 varieties of Pakistan's beloved summer fruit. Held at a local hotel, the two-day event drew large crowds including citizens, tourists, farmers, agricultural experts, students, and professionals from the food and hospitality industry. The festival offered a vibrant mix of traditional dance, folk music, handicrafts, and a wide array of mango-based dishes, turning the event into a unique celebration of agriculture, culture, and culinary creativity. The festival was formally opened by Punjab Secretary of Tourism Fareed Ahmad Tarar and Dr Nasir Mehmood, Managing Director of the Tourism Development Corporation of Punjab (TDCP). Tarar described the festival not just as a celebration of mangoes but also as a tribute to the hardworking farmers of Punjab and the province's rich agricultural and cultural heritage. Dr Mehmood emphasized that the event serves as a platform for promoting tourism, hospitality, and local industries alongside agriculture. Agricultural expert Rana Asif Hayat Tipu highlighted that five tons of export-quality mangoes were made available at farm-gate prices to address public concerns that high-grade fruit is rarely accessible in retail markets. He warned, however, that climate change, intense heat, dust storms, and water shortages had severely affected this year's crop, causing an estimated 40–50% decline in production. Read: Eat mango at night for these 10 incredible health benefits Experts noted that Pakistan typically produces around 1.8 million metric tons of mangoes annually, with Punjab contributing 70% of the national output, Sindh 29%, and Khyber Pakhtunkhwa about 1%. Due to adverse weather conditions, 2025's output is projected to drop to approximately 1.4 million metric tons. Nonetheless, the government has ambitiously raised the export target to 125,000 metric tons this season, aiming for $100m (approx. PKR 28m) in foreign exchange earnings. Last year, only 13,681 metric tons were exported, generating $46.7m. Festivalgoers, particularly women and young attendees, expressed excitement over witnessing such a diverse array of mango varieties in one location—something they rarely encounter in local markets. Nimra, a representative of a hospitality group, shared that their stall was focused on teaching attendees how to prepare a variety of mango-based dishes such as cakes, shakes, chutneys, juices, and ice cream, promoting mangoes as a versatile ingredient beyond a simple chilled fruit. Young artist Sarah Muhammad Hussain and her team displayed mango-themed paintings, capturing the fruit's vibrant colors and aromatic essence on canvas. Pakistan cultivates more than 200 mango varieties, about 20 of which are grown commercially and exported globally. These include popular types such as Chaunsa, Sindhri, Neelum, Anwar Ratol, Langra, Dussehri, Began Phali, Gulab Khas, Saroli, and Zafran. Known for their exceptional taste, aroma, color, and nutritional value, Pakistani mangoes continue to enjoy premium status in international markets, earning them the title 'King of Fruits.' According to TDCP officials, the Mango Festival plays a pivotal role in boosting agri-tourism and cultural exchange while also facilitating direct interaction between growers and exporters—enhancing value chains and market access for local producers. Previously, twin cities of Islamabad and Rawalpindi revelled in the sweet bliss of mangoes, aptly hailed as the "King of Fruits," as the juicy delight brings joy to people of all ages in the summer season. Vibrant displays of mangoes greet shoppers in local markets, with vendors showcasing every kind of mango from the renowned Chaunsa, Sindhri, and Anwar Ratol to the prized Langra, Fajli, and Dusehri. Every type of variety is readily available. Mango lovers can relish the sweetness of Chaunsa, the tanginess of Sindhri, or explore other unique flavors, making the twin cities a haven for mango connoisseurs. As people enjoy the mango season, vendors are working hard to meet the demand. A fruit vendor in Islamabad's F-6 market, Muhammad Ali, shared that "We are importing mangoes from the best orchards in Sindh and Punjab to ensure top quality and flavour. He said that Mangoes are flying off the shelves and they are having a great season so far, with Chaunsa and Sindhri being the top sellers.
Express Tribune
16 hours ago
- Express Tribune
Taxman gets arrest powers
Listen to article A National Assembly panel on Saturday approved special powers for tax authorities to arrest individuals involved in tax fraud, while it deferred the approval of another fiscal law that would have suddenly deprived government entities of their cash surpluses. Meanwhile, teachers and researchers will now be subject to full income tax, as the International Monetary Fund (IMF) did not agree to the government's proposal to extend the 25% income tax rebate for another fiscal year. Federal Board of Revenue (FBR) Chairman Rashid Langrial informed the National Assembly Standing Committee on Finance that the IMF had refused to extend the rebate. The committee, chaired by Syed Naveed Qamar, approved legal powers for the FBR to arrest taxpayers involved in tax fraud without prior court approval. However, additional safeguards were added to limit the discretionary use of these powers. At one point, Qamar remarked that the tax fraud "law has been borrowed from the National Accountability Bureau". The Senate Standing Committee on Finance had already cleared the controversial proposal. Now, following minor amendments by the National Assembly panel, the bill is expected to become law from July 1. Tax fraud has been defined as: "knowingly, intentionally or dishonestly doing any act or abets any action to cause loss of tax under this Act, including: using or preparing false, forged and fictitious documents including return, statements, annexures and invoices; false claim of input tax credit based on fictitious transactions; issuance of any tax invoice without supply of goods; tampering with or destroying of any material evidence or documents required to be maintained; generating fake input through manipulation of return filing system of the Board and making fake entries in the sales tax returns or in the annexures; and making fictitious compliance of section 73, including routing of payments back to the registered person, or for the benefit of the registered person, through a bank account held by a supplier or a purported supplier." Upon committing any of the above offences, the FBR will have the authority to arrest the individual without first seeking a warrant from any court of law. FBR Chairman Rashid Langrial said the criminality of tax fraud has been divided into two parts. In some cases, court permission will be required before an arrest is made. He explained that crimes such as suppression of taxable supplies under the Sales Tax Act, suppression or nonpayment of withholding tax for more than three months, dealing in goods liable to confiscation and making taxable supplies without registration will require court approval for arrest. According to the proposal, an Inland Revenue officer not below the rank of assistant commissioner – or any officer authorised by the board – may initiate an inquiry upon approval from the commissioner, if there is material evidence pointing to the commission of tax fraud or an offence warranting prosecution under the act. The inquiry officer shall have the powers of a civil court under the Code of Civil Procedure, 1908, including summoning and enforcing attendance of any person, examining on oath, requiring discovery and production of documents and receiving evidence on affidavits. The inquiry officer must complete the inquiry within six months. During proceedings, the officer must provide the accused with a chance to be heard and confront them with details of the alleged fraud. A final report will then be submitted to the commissioner, who may either approve a full investigation, request further details, or close the matter. Upon approval, the investigation must be completed within three months. The board may authorise a commissioner — through a three-member committee notified by the chairman — to issue an arrest warrant if the tax loss exceeds Rs50 million. Arrests will only be made if the accused fails to respond to three notices, attempts to flee, or is likely to tamper with evidence. When asked, Langrial said the accused can also be arrested at the airport if there is suspicion of an escape attempt. Cash surplus The standing committee held an extended discussion on a government proposal to assert full rights over the cash surpluses held by state-owned enterprises. The proposed amendment to the Public Finance Management Act aimed to grant the federal government control over these surpluses. "The federal government's budget deficit would never end, and it now wants to bankrupt the public sector companies," Syed Naveed Qamar said. Finance Minister Muhammad Aurangzeb argued that the companies were acting like "states within a state" and were not cooperating. He added that even government-nominated board members were not being heeded, blaming bureaucrats for the lack of progress. Minister of State for Finance Bilal Kayani withdrew the bill from the agenda, saying the government would reintroduce it after incorporating the committee's recommendations to strike a balance between fiscal discipline and autonomy. One major state-owned company was reported to be sitting on a cash surplus of Rs253 billion.
Business Recorder
21 hours ago
- Business Recorder
‘She Feeds the World programme' successfully concluded
ISLAMABAD: CARE Pakistan with support from PepsiCo Pakistan and in partnership with the PepsiCo Foundation's long-term commitment to driving social impact marked the successful conclusion of its flagship She Feeds the World (SFtW) programme with a national event titled, 'She Nourishes Change'. The event brought together policymakers, donors, researchers, civil society members, and community leaders to honour the women leading efforts to redefine agriculture, nutrition, and rural resilience in Pakistan. Launched in 2023, SFtW was designed to address some of the most pressing challenges in rural Pakistan including climate stress, food insecurity, and limited access to clean water, and the persistent exclusion of women from agricultural systems. What emerged from the fields of Vehari and Okara over two years was not just progress, but transformation. The programme directly supported over 130,000 people, while indirectly reaching an additional 1.5 million individuals. Women-led Village Savings and Loan Associations mobilized over PKR 8.9 million, enabling the launch of micro-businesses and strengthening financial independence. The adoption of climate-smart farming practices led to impressive yield increases - maize harvests rose from 63.5 to 74.7 maunds per acre, and potato yields improved from 60.1 to 69.4 maunds per acre. Access to clean water was significantly enhanced through the installation of 10 water filtration plants, which now serve 32,717 people—many of whom gained access to safe drinking water for the first time. Copyright Business Recorder, 2025
