Prime Minister Imran Khan on Monday launched the country’s first instant digital payment system called “Raast”, which he said would boost the country’s formal economy.
Addressing the launch ceremony in Islamabad, he termed the new system a “big step” towards realising Pakistan’s full potential, saying the country’s cash economy was a “big obstacle” for it to fully take advantage of its population of 220 million.
“The biggest loss [because of] the cash economy is [to] our tax collection. Pakistan is among the lowest tax collectors in the world,” the premier said, adding that out of a population of 220m, only two million were taxpayers.
Explaining how the low tax collection affected the country, the prime minister said that it meant “we cannot build our infrastructure. We cannot do human development. We cannot educate children or improve hospitals.”
“A country which 50 years back was advancing the fastest in the region, cannot [develop] because we do not have enough money [for it],” he lamented.
He said that the digital payment system would “slowly take people away from the cash economy” to a point where advantage could be taken of the country’s large population. Besides the shift towards his vision of ‘Digital Pakistan’, the system would also lead to the inclusion of people from the weaker segment of society, according to the premier.
“Another important aspect of this [is that] we include [people from the weaker segment of society] too in our development.”
He said that the government’s poverty alleviation initiative — Ehsaas — was using the system of mobile wallets and was considering incorporating women’s bank accounts into the programme. “Raast will take this forward,” he added.
“Our effort is that we bring financial inclusion to women, give them opportunities, open bank accounts for them, help them, give them livestock so they can themselves [improve] their standard of living and it becomes a source of livelihood for them. The Raast programme will help with this.”
Increased remittances
The prime minister congratulated the State Bank of Pakistan (SBP) for the way it “engaged overseas Pakistanis [and] the way remittances increased”.
“Never before have remittances increased like this,” he said, referring to the latest data by the SBP which showed that remittances from overseas Pakistanis during Dec 2020 rose by 16.2 per cent year-on-year to $2.436 billion, compared to $2.097b in December 2019, clocking in above $2b mark for the seventh consecutive month.
“It too is a big achievement of the SBP that our overseas Pakistanis who sent money through non-formal channels are now trying to send through formal channels.”
The benefit of the increased remittances could be seen in how the country’s current account had been in surplus for the last five months, the premier said, adding that the biggest benefit was a decrease in pressure on the rupee.
“As soon as the current account is in deficit, and fewer dollars come into the country while more go out, there is pressure on the rupee and as the rupee depreciates, the whole society is affected.”
The poor people were the ones most affected by this as import of everyday household items such as ghee and pulses became more costly. “It has an impact on everything.”
“So [when] the current account went into surplus, it took off a lot of pressure from our rupee,” the prime minister said, while appreciating the role of the SBP that he said had taken steps to encourage Pakistanis working overseas to send back money through formal channels.
“The effort of Raast is to boost our formal economy.”
He once again congratulated the SBP and its governor, Dr Reza Baqir, saying they had to “think every day how we can bring the remittances through formal channels”.
“This is a great challenge for you,” he said while addressing Baqir and his team. “I pay tribute to you for what you have done till now.”
The prime minister also thanked Queen Maxima of the Netherlands for “taking so much interest in Pakistan, in the wellbeing especially of women living in deprived areas”, for wanting to increase financial inclusion and for also taking an interest in the Ehsaas programme.
He also thanked the Bill and Melinda Gates Foundation for their help to Pakistan, especially in the polio eradication programme.
The prime minister also thanked the British High Commission and the World Bank.
Explosion in digital payments
SBP Governor Dr Reza Baqir, who spoke before the premier, said that between 500 and 1,000 new accounts were being opened in the country every day and so far $280b had been sent into these accounts.
“More importantly our remittances from overseas Pakistanis are at record-breaking levels. There have been about $2b [coming in the form of remittances] every month since the beginning of this fiscal year.”
He said that besides the increase in remittances, the country also witnessed “an explosion in the use of digital and online channels to make payments”.
“During the first quarter of this fiscal year, the number of transactions through mobile banking channels rose to 36 million, this represents a growth of 140pc over last year,” the central bank governor shared.
The amount sent through these channels rose to Rs900b in the first quarter of this fiscal year, which was a growth of 200pc over last year, he added.
“These are phenomenal numbers for any country in its journey of digitalisation.”
He said that in line with the prime minister’s vision for low-cost housing and the construction industry, banks were training their employees to facilitate people who came to their branches to get information about the markup subsidy scheme to promote low-cost housing.
“We at the State Bank are helping banks in this journey and also monitoring the progress.
“I want to assure you Mr Prime Minister, ladies and gentlemen that the SBP will continue to innovate. It will continue to embrace opportunity to bring digitalisation to our country and to bring the financial system to those who are not in it,” Baqir said.
He concluded by thanking the Bill and Melinda Gates Foundation, Adviser to the Prime Minister for Institutional Reforms Dr Ishrat Husain, Queen Maxima, the World Bank and the British High Commission.
‘Remarkable’ achievement
Gates Foundation CEO Mark Suzman said that the progress towards digitalisation made in the last three years was “remarkable”.
Talking about the new system, he said: “With Raast in place, individuals, small businesses and government agencies will be able to transact seamlessly and at low cost regardless of who or what provides the host for the underlying accounts.
“Over time, our hope is that the full range of government payment programmes in Pakistan will be routed through Raast.”
Suzman also read out a statement from Bill Gates in which he said that he was “thrilled” about the launch of the digital payment system.
“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,” the statement quoted Gates as saying.
