Pakistan’s push towards a cashless economy has struggled to gain traction, with official data showing that fewer than 700,000 retailers across the country have adopted any form of digital payment solutions. Retailers, who represent a large share of cash-based transactions, remain reluctant to move away from traditional payment methods despite the government’s efforts to expand digital financial inclusion. Prime Minister Shehbaz Sharif recently reviewed the progress of the national cashless economy initiative and expressed concern over the slow pace of adoption, directing authorities to intensify public awareness campaigns, particularly in rural areas.
During a high-level briefing, officials informed the premier that as of September 2025, less than 700,000 merchants had been linked to digital payment modes, with only 39,000 of them based in Islamabad. The government’s goal is to connect at least two million retailers by June next year, a target described by experts as ambitious given the resistance from the trading community. Sharif reiterated that transforming Pakistan into a cashless economy was vital for sustainable development and urged relevant departments to accelerate digitalisation efforts across the financial system. Minister of State for Finance Bilal Azhar Kayani has been assigned to oversee and monitor the initiative’s implementation.
Data presented during the briefing highlighted the challenges facing this transition. Currency in circulation rose to 34 percent by June this year, suggesting persistent reliance on cash despite rising digital banking activity. A proposal in the government’s mini-budget to raise withholding tax on cash withdrawals to 1.5 percent was also discussed, though analysts warn that such measures may unintentionally encourage cash hoarding. Traders, who have historically avoided entering the formal tax net, continue to resist digitisation efforts. Authorities are attempting to link traders with digital platforms to enable monitoring of sales and tax compliance, but progress remains limited. The government believes that increased digital transactions could help rebalance the tax burden, which currently falls disproportionately on the salaried and industrial sectors.
According to recent figures, traders contributed only Rs166 billion in income tax last fiscal year, compared to Rs606 billion paid by the salaried class. The government’s plan to use digital payments for transparency and traceability aims to address such disparities. Officials briefed the prime minister that digital payment options are now being integrated with licensing systems for new businesses and that scannable payment codes are being deployed at retail outlets across major cities. Digital solutions have also been extended to utility bill payments, facilitating billions of rupees in electronic transactions. Meanwhile, mobile applications used for government services in Islamabad are being linked to QR-based payment gateways to streamline citizen services.
Despite the hurdles in merchant adoption, Pakistan has made notable progress in expanding digital banking usage. Against a target of 105 million users by December 2025, over 112 million individuals were already using digital banking platforms as of September. The prime minister noted that this growth demonstrates increasing public trust in digital financial systems and commended the success of digital disbursements through the Benazir Income Support Programme (BISP). During Ramazan, financial assistance was successfully transferred to deserving families via digital wallets, marking an important step in financial inclusion.
Sharif emphasized that the move towards a cashless economy would enhance governance efficiency and reduce corruption by promoting transparency in financial flows. The government is now working with the State Bank of Pakistan to accelerate digital financial inclusion, which currently stands at 68 percent of the population and is expected to reach 70 percent by the end of next year. The premier was informed that new digital banking licences, including for Raqami Digital Bank, have been issued to boost competition and innovation in the sector. Furthermore, the government aims to increase government-to-private-person payments digitally by 60 percent by December, though progress so far has reached only 35 percent. Officials acknowledged that while the targets are ambitious, ongoing efforts indicate gradual but steady advancement towards a more digitized and transparent financial ecosystem.
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