Pakistan’s drive toward a cashless economy faces hurdles as fewer than 700,000 retailers are currently connected to digital payment platforms. Despite government efforts, resistance from the retail sector slows the transition.
Prime Minister Shehbaz Sharif has prioritized reducing cash usage to strengthen Pakistan’s financial system and boost transparency. The government aims to connect at least 2 million merchants to digital payment networks by June 2026. Retailers, however, remain cautious about adopting digital modes, particularly outside major cities.
As of September 2025, only around 39,000 retailers in Islamabad are linked to digital payment systems. Minister of State for Finance Bilal Azhar Kayani is leading the implementation of the cashless economy initiative.
PM Sharif emphasized, “Transitioning to a cashless economy is essential for Pakistan’s sustainable development,” urging intensified awareness campaigns in rural areas.
Despite these measures, cash in circulation has risen to 34%, and proposed increases in withholding tax on cash withdrawals could unintentionally encourage cash hoarding. Analysts note that traders’ reluctance to formalize continues to place a heavier tax burden on salaried individuals and the manufacturing sector. Last fiscal year, salaried taxpayers contributed Rs. 606 billion, significantly more than the Rs. 166 billion paid by traders, highlighting disparities in tax compliance.
The government’s focus on linking retailers to digital payments, rather than immediate taxation, aims to improve transparency and monitor sales effectively. Expanding digital adoption in Pakistan’s retail ecosystem is seen as a critical step toward modernizing the economy, reducing informal cash handling, and encouraging broader financial inclusion.