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Islamabad, Pakistan's capital city. Image © Shutterstock

Prime minister Imran Khan said the cash-based economy is the biggest hurdle in transforming the south Asian country, particularly because of its effect on taxes.

Launching the payment system, known as Raast, Khan said just two million of Pakistan’s 220 million population pay taxes, with just 30,000 people paying 70% of the total tax collected.

“Pakistan collects about the least amount in taxes in the world,” he said.

“We cannot build infrastructure, we cannot work on human development, or educate children, or improve hospitals.”

Raast will also be used by the government to pay salaries, pensions and benefits.

It is hoped the fast payment system will help spur economic growth by facilitating transactions between small businesses and individuals.

Queen Máxima of the Netherlands, who was at the launch event in her capacity as a special adviser to the United Nations secretary-general, said the move was an “important milestone” towards creating an inclusive, digital economy.

“This is particularly significant for vulnerable segments [of the population], such as women and the poor, and especially during this pandemic,” she said.

“These groups have been disproportionately affected by Covid-19, in part because they were already underserved prior to the pandemic.”

The latest data from 2018 shows men in Pakistan are about five times more likely to have a bank account than women, and in the poorest 40% of the population – just 14% – have an account.

Bill Gates, whose foundation worked with the Pakistani government to create Raast, said in a recorded message that he hoped “that in years to come, we will look back and see this new, digital public good as an important contribution to our shared goal of giving all people the tools they need to lift themselves out of poverty”.