Pakistan’s plans for a central bank digital currency (CBDC) have gained momentum, with Finance Minister Muhammad Aurangzeb discussing the nation’s undocumented economy and struggles with financial inclusion at the World Economic Forum (WEF) special meeting in Riyadh. He highlighted that half of Pakistan’s economy is not officially recorded, and emphasized the potential of digital wallets to empower women financially. The International Monetary Fund (IMF) expressed concerns about economic struggles in countries like Pakistan, indicating a global economic divide with certain countries thriving while others fall behind. Pakistan’s central bank, the State Bank of Pakistan (SBP), aims to launch a digital rupee by 2025 to address economic challenges and enhance financial inclusion.
Governor Jameel Ahmad announced the SBP’s plan for a digital rupee in July 2023, focusing on careful consideration of other central banks’ experiences with CBDCs to prioritize a well-designed and secure digital currency for Pakistan. Pakistan’s high inflation rate, at 20.7% as of May, may be leading businesses and individuals to seek alternative currencies like crypto. Despite government crackdowns, Pakistan ranked eighth globally in crypto adoption in 2023, hinting that the SBP might be considering a CBDC to maintain control over the national digital currency and counter the appeal of cryptocurrencies. The SBP’s cautious approach to developing a digital currency reflects its aim to address economic challenges and maintain stability in Pakistan’s financial landscape.
Pakistan’s central bank faces pressure to keep pace with global trends in CBDC development, as over 98% of central banks worldwide are exploring digital currencies to improve access to central bank money and enhance functionalities. Regional neighbors like India are already testing wholesale and retail uses for their CBDCs, signaling the need for Pakistan to accelerate its efforts in this domain. The urgency for Pakistan to develop a CBDC is underscored by the growing adoption of digital currencies globally and the potential benefits for financial inclusion and economic stability. By fast-tracking the development of a digital rupee, the SBP aims to leverage technology to address economic challenges and empower individuals and businesses in Pakistan.
The potential launch of a CBDC in Pakistan represents a significant opportunity to tackle issues like the undocumented economy and financial exclusion, particularly for women facing cash theft and other barriers. The government’s support for women through assistance programs, combined with the potential of digital wallets to offer greater financial control, highlights the transformative impact of a digital currency in empowering marginalized groups. IMF Managing Director Kristalina Georgieva’s concerns about economic struggles in countries like Pakistan underscore the importance of leveraging technology and innovation to address global economic disparities and support sustainable growth. Pakistan’s focus on developing a well-designed and secure digital currency reflects a strategic approach to enhancing financial inclusion and stability in the country.
As Pakistan navigates the challenges of economic disparity and financial inclusion, the development of a CBDC emerges as a strategic initiative to modernize the country’s financial infrastructure and strengthen its position in the global economic landscape. By embracing technological advancements and harnessing the potential of digital currencies, Pakistan’s central bank aims to address pressing economic issues and empower individuals and businesses with greater financial control. The growing momentum towards a digital rupee reflects Pakistan’s commitment to leveraging innovation to drive economic growth and foster inclusive prosperity for all segments of society. With over 98% of central banks worldwide exploring CBDCs, Pakistan’s entry into the digital currency space signifies a step towards financial modernization and resilience in an increasingly digital world.
