KARACHI: Finance Minister Muhammad Aurangzeb has said that the undocumented economy has been the biggest challenge for the country and the government is considering transition towards the digital solutions for its documentation.

Speaking during a session on Opening Doors with Fintech at a special World Economic Forum (WEF) meeting in Riyadh on Sunday, the finance minister said that approximately Rs10 trillion in cash is circulating in the market.

“We generate Rs9.4 trillion in annual revenues, yet half of our economy remains undocumented,” he stated.

He stressed the necessity for the country to envision its economic framework anew, following the footsteps of other nations that have successfully utilised digital solutions.

The finance minister stressed that the country has two important pillars that can propel the nation towards economic digitalisation.

SBP governor Jameel says economy on path to recovery

“We have national identification, supported by Nadra, and we have [a] real-time payment system called Raast. These are two important pillars with that we can start moving towards documenting the economy through digital solution,” he said.

Mr Aurangzeb said that an agreement was signed with McKinsey on Friday to facilitate comprehensive digitalisation of the economy.

“They are going to come in and help us with the end-to-end digitalisation of our economy. It is a huge priority for us,” the finance minister said.

He noted that the government is extending the digital solutions to the informal sector to accelerate the process of documentation of the economy.

“Based on the latest figures I have, approximately 700,000 SMEs and around six million farmers are being offered credits through digital solutions. There is an absolute need for scaling up.”

Furthermore, the foreign minister emphasised the importance of extending digital solutions to women and the unbanked population segment.

“The government is providing cash to the poor women of Pakistan. Women say that the male family members take cash from them. Unfortunately, that is a reality,” he said.

“The women want to get the cash through the digital wallet,” said the finance minister.

He said that harnessing digital transformation is crucial to address economic challenges effectively and promote inclusive growth across all segments of society.

In addressing macroeconomic challenges, the finance minister assured that the government is diligently working to steer the economy in the right direction.

SBP governor applauds economic recovery

Separately, State Bank of Pakistan (SBP) Governor Jameel Ahmad has also acknowledged that the government’s firm commitment and the SBP’s efforts to respond to the macroeconomic challenges have resulted in a significant improvement in the economy.

He expressed his views while addressing the ICMA convocation in Karachi as the chief guest, according to a statement.

He noted that a year ago, Pakistan was facing a very challenging macroeconomic environment. “Inflation had reached as high as 38 per cent; foreign exchange reserves were rapidly depleting; the exchange rate was under a lot of pressure, and uncertainty was quite high.

“However, today, inflation is sharply decreasing; our reserves have risen to around $8 billion despite heavy debt repayments and will soon cross the $9 billion mark; the current account deficit has significantly narrowed, resulting in a stable rupee. Additionally, the stock market is reaching new highs,” he added.

The SBP governor stressed the need for fresh perspectives and innovative solutions to address the longstanding issues facing the economy. This fresh perspective and innovative thinking have become more necessary as the global shocks facing the economy are becoming increasingly complex.

He shared that climate change, technological advancements, cybersecurity threats, and financial innovations are adding new dimensions to the risks to economic and financial stability.

Published in Dawn, April 29th, 2024