Pakistan economy Has become Big demotic Economy in 2023 Than India & BANGLADESH

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  • The use of cash in Pakistan has been on the rise, with documented currency in circulation (CiC) reaching over Rs. 8 trillion.

This increase is attributed to the growth in the size of the economy and the prevalence of cash in doing business. 

Moreover, the total deposits with local banks in Pakistan have reached Rs. 23 trillion, indicating a CiC-to-bank deposit ratio of 34 percent. 


This ratio is higher than that of Bangladesh and India and suggests that Pakistan has a larger informal economy than its South Asian counterparts.

There are several reasons :

Lack of financial literacy: 

Many people in Pakistan do not have access to banking facilities and are not aware of the benefits of using digital payments. This lack of financial literacy leads to the preference for cash transactions.

Low trust in the banking system:

 Due to past incidents of bank fraud and the lack of effective regulation, people in Pakistan are hesitant to trust banks with their money. This lack of trust leads to the use of cash as a more secure form of payment.

Cultural factors: 

The use of cash is deeply ingrained in the culture of Pakistan, and many people prefer to conduct transactions in cash as it is seen as a more reliable form of payment.

Limited access to digital payment infrastructure:

The lack of infrastructure for digital payments in Pakistan limits the adoption of electronic payments, forcing people to rely on cash.

The CiC-to-bank deposit ratio in Pakistan economy  is higher than that of Bangladesh and India, indicating a larger informal economy.


 The informal economy refers to economic activities that are not regulated or taxed by the government.

 These activities include both legal and illegal businesses that operate outside the formal economy.

The larger informal economy in Pakistan can have both positive and negative impacts on the economy.

 Some of the positive impacts include:

Increased employment opportunities: 

The informal sector provides employment opportunities for people who would otherwise be unemployed.

 These businesses often do not require formal education or training, making it easier for people to find work.

Lower costs: Informal businesses often have lower overhead costs.which enables them to offer goods and services at lower prices. 


This can benefit consumers who are looking for affordable options.


 Informal businesses are more flexible and adaptable than formal businesses.

Allowing them to respond quickly to changing market conditions. This flexibility can lead to innovation and new business ideas.

 The negative impacts of a larger informal economy include:

Reduced government revenue:

 The government loses out on revenue from taxes and other fees when economic activities are conducted in the informal sector. 

This reduces the government’s ability to fund public services and infrastructure.

Lack of regulation: 

Informal businesses operate outside the formal regulatory framework, which can lead to unfair practices, exploitation of workers, and substandard products and services. 

This lack of regulation can harm consumers and workers.

Limited access to finance:

 Informal businesses often have limited access to finance, which limits their ability to grow and expand. 

This can prevent these businesses from reaching their full potential and contributing more to the economy.

To promote a more formal economy, the government needs to invest in digital payment infrastructure, improve financial literacy, and provide better regulatory oversight.

 This will help to reduce the CiC-to-bank deposit ratio and promote a more regulated and transparent economy.


Moreover, promoting financial inclusion and reducing the reliance on cash can help to reduce poverty, increase economic growth, and create more opportunities for people in Pakistan economy.

pakistan economy:

 the use of cash in Pakistan economy is prevalent due to various reasons, including limited access to digital payment infrastructure, cultural factors, and lack of financial literacy. 

The higher CiC-to-bank deposit ratio in Pakistan as compared to Bangladesh and India indicates a larger informal economy, which can have both positive and negative

Encouraging informal businesses to register and comply with regulations, such as reducing the tax burden on small and medium-sized enterprises, can promote a more formal economy.

Lack of access:

The lack of access to credit and financial services for informal businesses also limits their growth potential and contribution to the economy.

Developing alternative sources of financing, such as microfinance institutions, can promote financial inclusion and support the growth of the informal economy.

Improving financial literacy and investing in digital payment infrastructure can also facilitate a shift towards a more formal economy.

Formal economy:

Promoting a more formal economy can lead to greater economic growth, reduced poverty, and increased opportunities for people in Pakistan.

The government needs to take a multi-faceted approach to address these challenges and promote a more formal economy in Pakistan economy.

The rise in cash transactions in Pakistan economy suggests that the government needs to implement effective monetary policies to manage inflation and stabilize the economy.

The larger informal in Pakistan economy also makes it difficult for the government to regulate the money supply and monitor inflation

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