Pakistan’s plans for a central bank digital currency (CBDC) gained momentum during a World Economic Forum special meeting in Riyadh. Finance Minister Muhammad Aurangzeb highlighted the struggles of Pakistan’s undocumented economy, with half of its economy not officially recorded. He also discussed challenges in financial inclusion, especially for women, due to issues like cash theft by family members. Aurangzeb emphasized the potential of digital wallets to empower women financially, offering them greater control over their money. The IMF Managing Director also expressed concern about economic struggles in countries like Pakistan, indicating a global economic divide.
Pakistan’s central bank, the State Bank of Pakistan (SBP), is looking to fast-track the development of a digital rupee with a potential launch in 2025. Governor Jameel Ahmad announced the plan in July 2023, prioritizing a cautious approach for a well-designed and secure digital currency. The high inflation in Pakistan (20.7% as of May) may be pushing businesses and individuals towards alternative currencies like crypto, leading to the country’s high crypto adoption rate globally. The SBP might be considering a CBDC to maintain control over the national digital currency and counter the appeal of cryptocurrencies.
Pakistan’s central bank risks falling behind in the global race for CBDCs as over 98% of central banks worldwide are actively exploring digital currencies to improve access to central bank money and expand functionalities. The SBP, while aiming for a digital rupee launch in 2025, may lag behind regional neighbors like India, which are already piloting wholesale and retail uses for their CBDCs. The urgency to catch up with other countries in developing CBDCs is crucial for Pakistan to address economic challenges and stay competitive in the global financial landscape.
The focus on financial inclusion for the unbanked population is a major driver for CBDCs in developing nations, but Pakistan’s central bank may have additional motives for developing a digital currency. With the country’s high inflation and increasing adoption of cryptocurrencies, the SBP might be exploring a CBDC to maintain control over the national digital currency and prevent the shift towards alternative currencies. By offering a secure and well-designed digital rupee, Pakistan could potentially address economic challenges and enhance financial stability in the country.
The issue of financial inclusion, especially for women, was highlighted by Finance Minister Aurangzeb during the WEF special meeting, citing concerns about cash theft by family members. He emphasized the potential of digital wallets to empower women financially, offering them greater control over their money. Pakistan’s government assistance programs for women were also acknowledged, but the introduction of a CBDC could further enhance financial empowerment and inclusion for women in the country. With careful planning and consideration, Pakistan’s digital currency initiative could play a significant role in advancing financial inclusion and stability in the nation.
