World Bank approves $300m loan to tackle Punjab's air pollution crisis
A thick layer of smog dampens the beauty of the iconic Badshahi Mosque in Lahore. Photo: NNI
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The World Bank has approved a $300 million loan to support Punjab's Clean Air Program (PCAP). This initiative aims to reduce pollution and improve public health.
The funding will help tackle the growing air pollution crisis, particularly in Lahore. The program aligns with the provincial government's Smog Mitigation Action Plan (SMAP).
Punjab faces severe air pollution, with Lahore regularly ranking among the most polluted cities. Vehicle emissions, industrial pollution, and crop residue burning are the primary causes of smog. These pollutants have led to rising health problems, including respiratory and cardiovascular diseases. The PCAP aims to reduce PM2.5 levels by 35% over the next decade, benefiting millions of residents.
The program includes modernizing agriculture, launching electric buses, and enhancing air quality monitoring. It will introduce 5,000 super seeders to curb crop burning, install 600 electric buses, and add air quality stations. Fuel quality will also be improved with new testing laboratories. Public awareness campaigns will educate citizens about pollution's health risks, focusing on vulnerable groups like schoolchildren and patients.
Beyond cleaner air, the program will reduce greenhouse gas emissions and create jobs in the electric vehicle sector. It will also support farmers and help them transition to modern, eco-friendly practices. With this initiative, Pakistan is taking a crucial step toward a healthier and more sustainable future.
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Only 26% of Pakistan's adult population had access to formal financial services in 2021, per the World Bank's Global Findex Database, leaving millions reliant on cash for daily transactions. This reliance on cash poses several challenges. Transactions are difficult to track, enabling tax evasion and the growth of the black economy. The Federal Board of Revenue (FBR) estimates that Pakistan's tax-to-GDP ratio, at around 10%, is among the lowest in the region, partly due to unreported cash-based activities. Cash facilitates illicit transactions, including money laundering, terrorist financing, and corruption, undermining economic stability and security. Handling physical cash incurs significant costs for printing, transportation, and security. For businesses and individuals, cash transactions are time-consuming and prone to theft or loss. 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The SBP's Open Banking Framework encourages data sharing to foster innovation and competition. Taxation and cash transaction limits To discourage cash usage and enhance tax compliance, the FBR has introduced measures to limit cash transactions and incentivize digital payments: Section 21(l) of the Income Tax Ordinance, 2001: This provision disallows tax deductions for business expenses exceeding PKR 250,000 if paid in cash, encouraging businesses to use banking channels. Withholding tax on cash withdrawals: Under Section 231A, a 0.6% withholding tax is imposed on cash withdrawals exceeding Rs50,000 per day from bank accounts, incentivising digital transactions to avoid additional taxation. Point of Sale (POS) integration: The FBR's POS Integration Rules (2021) require large retailers (Tier-1) to install POS machines linked to the FBR's system for real-time transaction reporting. Non-compliance results in penalties, pushing businesses toward digital payments. Tax incentives for digital transactions: The FBR offers reduced tax rates for merchants accepting digital payments, encouraging the adoption of card and mobile-based transactions. The digitalisation of currency in Pakistan, supported by initiatives like Raast, EMI regulations, and tax policies, holds immense potential to transform the economy. By promoting financial inclusion, enhancing transparency, and reducing the costs of cash handling, digital payments can drive economic growth and integrate millions into the formal financial system. However, challenges such as the digital divide, low financial literacy, and cybersecurity risks must be addressed to ensure an equitable transition. Pakistan's laws and regulations to discourage cash transactions, including POS integration, cash withdrawal taxes, and AML/CFT measures, are steps in the right direction. Yet, their success depends on robust implementation, public awareness, and infrastructural improvements. By learning from global models like India's UPI and investing in inclusive policies, Pakistan can build a digital economy that benefits all citizens, from urban elites to rural farmers. As the country moves toward a cash-light future, it must balance innovation with regulation, ensuring that the benefits of digitalisationfinancial inclusion, transparency, and efficiencyare accessible to all. The journey is complex, but with strategic reforms and collective effort, Pakistan can harness the power of digital currency to create a more inclusive and prosperous economy. THE WRITER IS A TRADE EXPERT WITH OVER 35 YEARS OF EXPERIENCE IN INTERNATIONAL TRADE, A COMMODITIES CONNOISSEUR & FORMER VICE PRESIDENT OF KCCI
