‘Raast’ launch

It remains to be seen what will be done to encourage willing widespread adoption among people outside formal economy

The recently-launched ‘Raast’ digital payments system will be a game-changer for Pakistan. Or at least that is what the government hopes. The system, part of the government’s broader Digital Pakistan initiative, has an admirable — if lofty — goal of shifting the economy from cash to digital. Raast aims to enable secure, efficient and transparent financial transactions which, the PM insists, will help fully utilise the country’s potential and transform the economy. The belief is that Raast will facilitate and encourage millions of poor people to step into the formal economy.

Unfortunately, it remains to be seen what will be done to encourage willing widespread adoption among people outside the formal economy. We also feel the belief that Raast will help widen the tax base may be misaligned with the previous goal. Most people who function entirely outside the formal economy would pay little, if any, income tax since they are already poor. The fact that government salaries, pensions, and welfare payments will all reportedly use Raast means that some people will be pushed to become early adopters. However, we must remind that the two former categories already pay their taxes, while the latter is, as discussed, too poor to be taxed.

A better short-term alternative would have been to push companies and businesses to shift to full digitisation of records, which would help create better records of where money is going. This includes salaries paid in cash, which we believe is what the PM was referring to. That is not to say that the system won’t work. The success of existing private sector payments systems such as JazzCash and EasyPaisa make this quite clear. As technology becomes more accessible, it becomes easier for consumers, rich or poor, to manage their finances from the comfort of their homes. Internationally, it is becoming relatively common for young people to be fully integrated in the formal company without ever having set foot in a bank. This is something that Raast and others, including traditional banks, could help facilitate.

While it would take longer for the benefits to the government through such an approach to become visible, we believe it would be a more pragmatic one.

Published in The Express Tribune, January 13^th, 2021.

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