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Business Recorder
26-05-2025
- Business
- Business Recorder
Raast to reform: Digitizing Pakistan's economy
Digital payment systems are rapidly transforming economies across the globe by enhancing transparency, reducing informality, accelerating the velocity of money, and spurring inclusive economic growth. In this context, Pakistan's digital payment platform, Raast, has rapidly emerged as a cornerstone of the country's digital financial infrastructure. With over 43 million consumers, 841,000 merchants, and 36 banks onboarded, Raast now processes more than 4.5 million daily transactions. Its adoption has seen exponential growth, with transaction volumes surging to 371 million and values reaching PKR 8.5 trillion in Q1 FY25 alone. Unlike costly international card networks, Raast offers zero-cost, QR-code, and IBAN/mobile-based transactions backed by national scalability and full government integration. Since its inception, Raast has processed over PKR 34 trillion, significantly reducing reliance on cash and foreign payment networks. However, despite Raast's technical success, Pakistan continues to lag in overall digital payment adoption. This gap stems from a combination of structural and behavioural barriers. Structurally, the country suffers from low levels of digital and financial literacy, weak incentives for merchants, and fragmented onboarding processes. Behaviourally, Pakistan's heavy reliance on cash transactions presents a significant obstacle to economic progress—perpetuating informality, limiting tax revenues, and stifling investment potential. Currently, 25 percent of the country's total money supply—over PKR 9 trillion—is in cash circulation, far above the regional average of approximately 6.5 percent. This cash dominance contributes to one of the lowest tax-to-GDP ratios (10 percent) and one of the largest informal sectors (57 percent) among peer economies like India and Brazil. These challenges are further compounded by policy inertia and institutional hesitation, primarily driven by IMF-imposed revenue targets. India's remarkable success with its Unified Payments Interface (UPI) offers valuable lessons and actionable frameworks that Pakistan can adapt by leveraging Raast. Since its launch in 2016, UPI has reshaped India's financial landscape—processing an astounding USD 5.8 trillion by 2024, generating estimated savings of USD 109 billion and accounting for 83 percent of all digital payments in the country. This transformation was driven by strategic government spending, regulatory incentives, and tax benefits targeted at merchants, consumers, and financial institutions. As a result, cash transactions in India declined significantly, with the cash-to-GDP ratio falling from 14 percent to 11.5 percent, signaling a significant shift toward formal and traceable economic activity. Likewise, Pakistan can take targeted steps such as enforcing digital payment thresholds, offering tax liability reductions for merchants using digital platforms, and reducing withholding tax on digital transactions between suppliers and retailers. A Raast-based payment ecosystem offers zero-cost transactions, nationwide scalability, universal interoperability, and full government integration—unlike traditional card-based systems, which are costly, urban-centric, and result in significant foreign exchange outflows. By localizing payment infrastructure, Raast helps conserve foreign exchange, expand financial inclusion, and foster sustainable digital infrastructure. Pakistan must also consider disincentivizing cash usage to accelerate adoption by introducing incremental withholding taxes on cash payments. Furthermore, promoting widespread integration of merchants with the FBR's e-invoicing and digital POS systems could create a strong multiplier effect, enhancing transparency and fiscal accountability. Significantly, the revenue streams targeted for relaxation contribute minimally to overall tax collections. Thus, offering these incentives would not substantially impact fiscal revenues nor violate IMF conditionalities. On the contrary, such reforms could expand the economic pie by reducing informality and increasing the volume of digital transactions. Estimates suggest Raast could generate over PKR 1.1 trillion in annual economic benefits—partly through tax savings for the government but primarily through broader multiplier effects and reductions in transaction costs across the economy. The economic rationale is compelling: transitioning toward a cashless economy, as demonstrated by India's experience, significantly boosts the velocity of money. Faster circulation enhances consumption, stimulates business expansion, and strengthens economic dynamism—ultimately increasing tax revenue and supporting long-term growth. In essence, Raast—supported by innovative policy interventions and strategic incentives—has the potential to reshape Pakistan's economic landscape. Pakistan can unlock the true promise of digital financial inclusion by enabling businesses and consumers to shift away from cash, reducing informality, and enhancing transparency. With a clear understanding that short-term tax relaxations can yield long-term economic dividends, the country is well-positioned to negotiate pragmatic reforms and fully realize Raast's transformative potential. Copyright Business Recorder, 2025
India.com
18-05-2025
- Business
- India.com
IMF Turns Screws, Slams Pakistan With Fresh Conditions, Warns Conflict With India Could Sink Bailout
New Delhi: As Pakistan's economic frailty teeters on the edge, the International Monetary Fund (IMF) has signalled a hardening of stance. It has slapped Islamabad with 11 fresh policy requirements to unlock its next bailout tranche. This brings the total number of conditions to a staggering 50. The latest decision reflects the global lender's growing unease not just over Pakistan's economic mismanagement but also in the wake tensions with India. Beyond fiscal and structural reforms, Pakistan's geopolitical behaviour is now on the radar. The warning is clear: if tensions with India persist or worsen, Pakistan's already-weak fiscal programme could unravel altogether. The message is as political as it is financial. India's precision airstrikes under 'Operation Sindoor' on May 7, in response to the April 22 Pahalgam terror attack, rattled not only Islamabad but also international observers. Pakistan's attempted retaliation via drones and missiles only worsened the outlook. And while a ceasefire was announced on May 10, the IMF is unconvinced the calm will last. The IMF's decision, as per reports, is directly linked Pakistan's conflict posture that will risk in budget execution, foreign reserves and reform timelines. Notably, the IMF has flagged Pakistan's ballooning defence expenditure, which is projected to exceed Rs 2.5 trillion for 2025-26, as a key vulnerability. That is an 18% hike driven by military tensions, even as the country struggles to provide electricity and curb inflation. Behind the scenes, the reports suggest, IMF staff were alarmed by the Pakistan's government's plans to shift funds away from development to defence after the flare-up with India. They view it as Pakistan's economic indiscipline. They say it is about choices Pakistan is making in the face of a crisis. Following are the new IMF-imposed reforms – Parliament must pass the upcoming Rs 17.6 trillion federal budget – with strict adherence to IMF benchmarks; Its provinces must enforce agricultural income taxes long evaded by feudal power brokers; and a long-awaited governance roadmap must finally be published. Long a black hole of subsidies and inefficiencies, the power sector also faces tighter scrutiny. Tariffs are set to be rebased annually, gas prices adjusted bi-annually and legal frameworks tightened around captive power and surcharges. The Rs 3.21 per unit cap on electricity debt servicing will be lifted – a move likely to raise bills for already-struggling households. But perhaps most symbolic of the IMF's micromanagement is its directive on used cars: Pakistan must ease import restrictions, extending allowances from three to five years by July 2025. It's a small move with big implications for middle-class consumers and the import-heavy auto sector. For Prime Minister Shehbaz Sharif, the squeeze is real. With falling reserves, investor skepticism and now increasing external conditions tied to regional behaviour, his government walks a tightrope. Any misstep – military or economic – could cost Pakistan dearly in the court of international lenders. As global attention focuses on Pakistan's next move, one truth is becoming harder to ignore – the country's economy is no longer a matter of balance sheets and budgets, it is now a geopolitical bargaining chip. And the IMF is calling the shots.
L'Orient-Le Jour
03-05-2025
- Politics
- L'Orient-Le Jour
Constitutional Council invalidates 2025 budget articles
The Constitutional Council on Friday annulled several articles of the 2025 state budget after two appeals by MPs, according to al-Markazia, during a session led by Judge Tannous Mechleb in the absence of Vice President Omar Hamzeh for health reasons. The 2025 budget text had been presented to Parliament by the caretaker government of Najib Mikati while it was handling current affairs at the end of September 2024. Criticized for its excessive use of taxes to fill the Treasury deficit, the text was finalized and enacted by decree by the current Cabinet of Nawaf Salam on March 6. This measure sparked criticism, mainly due to its being rushed by IMF-imposed deadlines on reforms. Two groups of MPs then decided to present appeals for invalidation, the first on March 26 by Melhem Khalaf, Najat Saliba, Firas Hamdan, Adib Abdel Massih, Bilal Hshaimi, Melhem Tawk, Adnane Trabolsi, Taha Naji, Ibrahim Mneimneh, Tony Frangieh and Paula Yacoubian. The second was submitted on March 27 by several FPM-aligned MPs, including head of the party Gebran Bassil, Jimmy Jabbour, Ghassan Atallah, Edgard Traboulsi, Nada Boustany, Charbel Maroun, Selim Aoun, Nicolas Sehnawi and Cesar Abi Khalil. The Constitutional Council invalidated several articles of the 2025 state budget, citing procedural and constitutional violations. These included the failure to seek parliamentary approval, retroactive application from the start of the year despite its adoption in March, and the absence of signatures from all relevant ministers. The Council also noted that the text was not automatically submitted for review as required. The ruling also pointed to violations of the principle of social equality in taxation and criticized the vague wording of certain provisions. It emphasized that constitutional texts should not contain retroactive clauses, further justifying its decision. Therefore, the Council decided to accept both appeals and invalidate articles 5, 17, 22, 25, 54 and 56, which are related to the aforementioned causes. This decision was made by the majority of those present, except for two judges. The text of this decision will be published in the next Official Gazette.
Business Insider
29-04-2025
- Business
- Business Insider
Top 10 African countries with the lowest debt to the IMF in April 2025
While the International Monetary Fund (IMF), can be useful during times of crisis, staying relatively debt-free provides considerable benefits to African countries, including economic autonomy and global legitimacy. Business Insider Africa presents the top 10 African countries with the lowest debt to the IMF in April 2025. This list is courtesy of data from the International Monetary Fund. Lesotho ranks number 1 on the list. Financial independence from organizations like the IMF is more than just a mark of distinction in a time when instability across the world is commonplace; it is a weapon for strategic growth and resilience. Low IMF debt gives African nations more legitimacy, independence, and flexibility. They can establish long-term strategies free from temporary conditions, invest in their people without outside permission, and handle crises without panic. A low IMF debt indicates fewer external restrictions for national policy actions. Countries that do not rely on IMF bailouts or extended loan facilities have greater leeway to create and implement economic plans that are suited to their development objectives. This independence is extremely useful in today's economic context, when governments must respond quickly to local challenges such as inflation, currency volatility, and rising food costs. Without IMF-imposed budgetary objectives or subsidy cuts, authorities can explore local solutions to safeguard their most vulnerable populations. For context, the African Forum and Network on Debt and Development (AFRODAD), a lobby group advocating for debt cancellation and addressing loan-related issues in Africa, named four African countries that are on the brink of debt default. These countries are Zambia, Ghana, Ethiopia, and Chad. While their debt are not the IMF alone, the report underscores the importance of maintaining low levels of debt, as all four countries listed also currently have very complex economic realities. With that said, here are the African countries with the lowest debt to the International Monetary Fund in April 2025, as seen on the IMF's website. Top 10 African countries with the lowest debt to the IMF in April 2025 Rank Country Total IMF Credit Outstanding ($) as of 04/28/2025 1. Lesotho 11,660,000 2. Eswatini 19,625,000 3. Comoros 19,887,940 4. Sao Tome & Principe 27,411,726 5. Djibouti 31,800,000 6. Guinea-Bissau 52,291,400 7. Equatorial Guinea 59,843,334 8. Cabo Verde 72,116,000 9. Somalia 87,000,000 10. Seychelles 99,839,500
