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Coronavirus
VERY HIGH
Pakistan Deaths
16,453
13724hr
Pakistan Cases
766,882
544524hr
Sindh
273,466
Punjab
273,566
Balochistan
21,000
Islamabad
70,609
KPK
107,309

ISLAMABAD: Prime Minister Imran Khan described the cash economy as a major reason for low tax-to-GDP ratio and low tax collection in the country, and added “major harm of cash economy is to the tax collection.”

Speaking as chief guest at the launching ceremony of Pakistan's “First Instant Digital Payment System Raast” on Monday, the prime minister said that only two million people were paying taxes out of 220 million population, and even of those, 70 percent tax was being paid by 3,000 people. Pakistan tax collection is low compared to other regional countries, he said, and added that he wanted to congratulate the governor State Bank of Pakistan (SBP) for introducing its Raast program as this is a step towards digital Pakistan.

The premier expressed the hope that “Raast Program” would boost the formal economy as there was a huge informal economy.

He said the government was unable to broaden the tax base and increase tax collection due to the informal economy.

The premier further stated that digital payment system would gradually reduce the cash economy and enable 220 million people to take benefit from it.

The Raast program would help take the Ehsaas program ahead and empowerment of women through financial inclusion the especially the low-income group and the poor women of rural areas.

The prime minister said that there was record increase in remittances because of the measures introduced by the SBP to encourage oversees Pakistanis to send money back home through formal channels.

The prime minister stated that increase in remittances, an achievement of the SBP, contributed to the current account surplus after a period of 17 years.

As a result, he said that the Pakistani rupee gained strength because there was no pressure on the exchange rate.

You (SBP) have to keep on thinking how to bring more and more people into the digital economy, the prime minister said, and added that the Raast program would also enable secure, efficient, and transparent financial transactions.

Governor State Bank of Pakistan (SBP) Raza Baqir said that financial transactions would be made more transparent and delay in issue of delay in payment of government would be resolved.

He added that the new system would also be beneficial for the banks and financial institutions.

He said that the digital Pakistan is rapidly increasing in the country and so far over 70,000 overseas Pakistan have opened digital accounts.

A statement issued by the SBP said that in his welcoming remarks, Dr Baqir informed that the Central Bank has been encouraging technological innovations in banking and payment systems for a long time; however, following the vision of the Prime Minister and his support it has stepped up its efforts further to accelerate the pace of digitalization in the country.

The SBP has taken various initiatives such as enabling Fintechs, and modernizing payments’ infrastructure.

Referring to the National Payments Strategy prepared with the help of World Bank (WB) and announced in November 2019, he remarked that Raast is the first major step taken to implement the strategy.

He highlighted that SBP initiated the project Raast, with the support of Bill and Melinda Gates Foundation and Karandaaz Pakistan, after a thorough review of ground realities about prevailing payment habits and in line with international best practices and standards.

The state-of-the-art faster payment system will provide a cheap and universal access to people of Pakistan especially those who are financially excluded and less privileged like women.

Dr Baqir told the gathering that the faster payment system will help spur economic growth especially by facilitating small businesses and individuals.

He shared the SBP’s plan to launch the system in a phased manner, starting with bulk payment module which will include digitization of dividend payments, salaries, pensions and other payments of government departments.

In next phases, Raast will digitize payments of micro and small business owners or merchants, who can then pay suppliers on time and fulfill other urgent payment obligations.

Similarly, the system will provide seamless person-to-person payments that will include features such as sending requests for payments and initiating payments using identifiers such as phone numbers or any other alias.

The UN Secretary-General's Special Advocate for Inclusive Finance for Development (UNSGSA) Queen Máxima of the Netherlands also addressed the ceremony through video link.

The Special Advocate has supported promoting financial inclusion in Pakistan over the years, including country visits in 2016 and 2019.

Pakistan launched its first national financial inclusion strategy (NFIS) shortly before the UNSGSA’s first visit.

During her UN country visit in November 2019, the UNSGSA delivered a speech at a ceremony to establish the micro payments gateway now being launched as Raast – Pakistan’s Instant Payment System.

“I am delighted to be here today for the launch of the pro-poor Micropayments Gateway, Raast, and to congratulate you on the draft Banking on Equality Policy. These are important milestones on the journey to a more inclusive financial system and to a digital economy that works for everyone. This is particularly significant for vulnerable segments—such as women and the poor, and especially during this Pandemic. These groups have been disproportionately affected by COVID-19, in part because they were already underserved prior to the pandemic. Based on the last Global Findex data from 2018, men in Pakistan were roughly five times more likely than women to have an account and, of the poorest 40% of the population, just 14% had an account. We know that financial inclusion has a pivotal role to help people deal with the health and economic crisis caused by COVID-19, and to assist them in exploring new opportunities. So these figures provide us an indication of the challenges lying ahead”.

Mark Suzman, CEO of the Gates Foundation, shared a prepared statement, via a video message, from co-chair, Bill Gates, who stated: “I hope that in years to come, we will look back and see this new, digital public good as an important contribution to our shared goal of giving all people the tools they need to lift themselves out of poverty. Our foundation is happy to support accelerating efforts towards digital financial inclusion in Pakistan, just like our continued partnership to eradicate polio, and for the Ehsaas poverty alleviation program.”

The ceremony was attended by dignitaries including federal ministers and secretaries; CEO Karandaaz; CEOs of banks and telcos and representatives of various other stakeholders, the statement concluded.

Copyright Business Recorder, 2021