Islamabad, Dec 13: The level of digital payments in the country could reduce the informal and cash economy by 22 % and additionally, the offer increases the country’s GDP by 7 % by 2025 generating 4 million jobs and $263 billion deposits in Pakistan revealed in the report “Transforming Pakistan Payment’s Landscape” by Karandaaz Pakistan.
There is also saving on a huge cost that central bank has to bear while printing money which the SBP has to spends a large amount for issuance and management of cash.
The banking regulator paid Rs 31 billion to the bureau in the last financial year 2023-24 to print, distribute, and replace defected notes, it added.
According to the report, the size of the documented economy of Pakistan is $ 341 billion, and the size of the informal economy is said to be 64% more than the formal economy.
Whereas the fiscal deficit space is occupied by banking sector, the level of Currency in Circulation (CiC) has gradually elevated as bottom of the business pyramid remains informal and constrained to a certain extent both its expansion and that of the economy.
Thirdly, if a major portion of the currency is held in cash in circulation beyond banking framework, it restricts the Central Bank to regulate inflation rate and guaranteeing economic stability.
For the comparison of Pakistan with other countries of the region, the CiC to bank deposit ratio in India is 17.8%, in Bangladesh, 16.7% whereas in Pakistan 34%.
Currently, the CiC banking industry is PKR 9 trillion while the banking deposit has reached PKR 30 trillion making the CiC–deposit ratio 34%. This is alarmingly high compared to India and Bangladesh.
This indicate that more of the monetary base is available in Pakistan in relation to the money supply than with the neighboring countries.
It reveals that Pakistan faces liquidity issues, besides an omnipresent cash-based substructure within the Pakistani economy.
To do this, Pakistan developed its own National Financial Inclusion Strategy (NFIS) in 2015, to become one of 47 countries with measurable targets.
The Person-to-Merchant (P2M) module was the third use case of RAAST, introduced for Pakistan’s Wholesale and Retail sector which accounts for 18% of the GDP and 31% of the services sector in the country. At an estimated 3 to 5 million merchants in the country, these establishments typically consist of grocery and food businesses, eateries and dining, electronics, apparel and shoes, entertainment, beauty and fitness, health and education and others (e.g. furniture shops, petrol stations, sanitary and hardware.
RAAST’s P2M model is designed to address the limitations of existing digital payment methods by offering a solution tailored to Pakistan’s economic and social context, the report added.
