ISLAMABAD: Despite the government’s push for a cashless economy, fewer than 700,000 retailers are currently linked with any form of digital payment system, well below the scale needed to reduce heavy cash usage in markets. Retailers remain the country’s largest handlers of physical currency.
Prime Minister Shehbaz Sharif reviewed progress on the initiative on Monday. Officials briefed him that as of September, less than 700,000 merchants were digitally connected, including just around 39,000 in Islamabad. The prime minister has now set a target of onboarding at least 2 million retailers by June 2026, though the goal is seen as challenging due to strong pushback from the trading community.
PM Sharif said shifting to a digital economy was crucial for sustainable development, directing concerned ministries to expand awareness campaigns, especially in rural areas. He assigned oversight of the programme to Minister of State for Finance Bilal Azhar Kayani.
The move comes as currency in circulation has climbed to 34% of the total money supply. Proposed increases in withholding tax on cash withdrawals may further incentivise people to hold cash rather than use banks.
Traders remain largely outside the tax net. Earlier claims that retailers contributed Rs693 billion in income tax last year were revised by the Federal Board of Revenue (FBR) to Rs166 billion. In comparison, the salaried class paid Rs606 billion — roughly 265% more — highlighting continued inequity in the tax structure.
The government hopes that linking retailers to digital systems will at least allow monitoring of sales volumes, enabling appropriate income and sales tax collection. However, political and administrative hesitation has slowed enforcement.
Meanwhile, the digitisation of financial services for the broader public is progressing faster. Against a target of 105 million digital banking users by December, over 112 million users are already active. Utility bill payments through scannable QR codes have also gained traction, and 10 million digital wallets under the Benazir Income Support Programme (BISP) are expected to be fully activated by month-end.
PM Sharif told the State Bank to accelerate financial inclusion targets, saying current goals were “not ambitious enough.” Digital bank licences are being issued, including for the new Raqami Digital Bank.
Authorities reported that financial inclusion is expected to reach 68% of the population by December, rising to 70% next year. However, the government’s plan to raise government-to-person digital payments to 60% by year-end appears difficult, given the current rate of about 35%.
