Pakistan’s ambitious drive towards a cashless economy has encountered significant obstacles, with less than 700,000 retailers nationwide currently offering digital payment solutions. Retailers, who form a major segment of cash transactions in the country, remain hesitant to fully adopt digital modes despite repeated government efforts.
Prime Minister Shehbaz Sharif received a detailed briefing on the progress of his cashless economy initiative, revealing that as of September 2025, fewer than 700,000 retailers had integrated digital payment methods. Of these, only 39,000 were in Islamabad. This figure falls short of the government’s target of linking at least 2 million merchants with digital payment platforms by June 2026, highlighting resistance from the trading community and structural challenges in adoption.
During the briefing, the prime minister emphasized that transitioning to a cashless economy is critical for sustainable development and efficient governance. He directed authorities to intensify awareness campaigns, particularly in rural areas, where cash transactions continue to dominate. The responsibility for monitoring and implementing the cashless economy initiative has been assigned to the Minister of State for Finance, Bilal Azhar Kayani.
Currency in circulation has risen to 34% as of June 2025, posing additional challenges for the initiative. A government mini-budget proposal aims to increase the withholding tax on cash withdrawals to 1.5%, a move expected to incentivize digital payments and reduce reliance on physical cash. Traders, however, remain a significant obstacle, reluctant to participate fully in the tax system, forcing the burden onto salaried individuals and manufacturing sectors.
Recent data from the Federal Board of Revenue (FBR) underscores this disparity. While traders were previously reported to have paid Rs693 billion in income tax, FBR chairman confirmed that actual payments amounted to Rs166 billion last fiscal year. In contrast, the salaried class contributed Rs606 billion, nearly 265% more than influential traders, demonstrating the imbalance in formal sector compliance.
Despite these challenges, digital adoption in banking and government services has shown progress. The government has linked mobile applications in Islamabad with a scannable code system and tied business licensing to digital payment integration. Payments for electricity and gas bills are now facilitated through digital modes, enabling billions in transactions. Additionally, the Benazir Income Support Programme (BISP) has successfully disbursed assistance through digital wallets, with 10 million wallets set to be activated by the end of this month.
Prime Minister Sharif highlighted the importance of accelerating digital financial inclusion, noting that 68% of the population is already covered, with plans to reach 70% by December 2026. Government-to-private-person payments aim to increase by 60% by year-end, though currently only 35% of such transactions occur digitally. The issuance of licenses for new digital banks, including Raqami digital bank, is expected to strengthen the country’s digital financial ecosystem further.
While the cashless economy initiative has achieved notable milestones in digital banking adoption, the slow uptake among retailers underscores the need for stronger incentives, regulatory support, and public awareness. Sharif emphasized that a fully digital financial system will improve governance, reduce corruption, and allow Pakistan to align with global digital economy trends.
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