Pakistan's aspirations for a central bank digital currency (CBDC) received renewed impetus as Finance Minister Muhammad Aurangzeb reignited the debate during a special World Economic Forum (WEF) meeting in Riyadh.

Addressing Economic Challenges

Aurangzeb underscored Pakistan's struggle with its undocumented economy, revealing that nearly half of the nation's economy remains unrecorded. With an annual revenue of Rs. 9.4 trillion ($33.7b), combating this challenge is paramount to fostering economic growth and stability.

Moreover, Aurangzeb highlighted the issue of financial inclusion, particularly for women facing obstacles like cash theft by family members. He emphasized the potential of digital wallets to empower women financially by providing greater control over their finances.

Global Concerns and Pakistan's Response

IMF Managing Director Kristalina Georgieva expressed apprehension about the economic struggles faced by nations like Pakistan, signaling a global economic disparity. In response, Pakistan's central bank, the State Bank of Pakistan (SBP), is gearing up to accelerate the development of a digital rupee, with a potential launch targeted for 2025.

Governor Jameel Ahmad emphasized the need for a cautious approach, prioritizing the design and security of the digital currency. The initiative aims not only to enhance financial inclusion but also to address Pakistan's high inflation rate, which stands at 20.7% as of May.

Navigating the Global CBDC Landscape

Pakistan faces the challenge of catching up with other countries in the global race for CBDCs. While regional neighbors like India are already piloting various uses for their CBDCs, Pakistan must expedite its efforts to remain competitive.

With over 98% of central banks worldwide exploring CBDCs, Pakistan's SBP recognizes the urgency to enhance access to central bank money and leverage digital currencies' functionalities.

Conclusion

As Pakistan advances its plans for a CBDC, the initiative holds promise for addressing economic challenges, promoting financial inclusion, and countering the allure of alternative currencies like cryptocurrencies. By embracing digital innovation, Pakistan aims to navigate the evolving global financial landscape and foster sustainable economic growth.