Digital gaps
Editorial Published July 17, 2025
WE live in a world where interactions between the state and citizens, and economic
performance, are being redefined by rapid technological developments. In fact, progress in this
area in the last two decades has shown how digital technology holds the key to inclusive
growth, economic productivity, better governance and global competitiveness.
But Pakistan has been unable to fully unleash its digital potential in spite of several government
initiatives in the past decade, a large, young, tech-savvy population and growing internet access.
This is mainly due to patchy efforts in this direction thanks to the absence of a comprehensive
policy framework. With only 17.7pc of people making digital payments in Pakistan — where
59m payment cards, accounting for only 24pc of the population, have been issued, compared to
71pc in India — the potential for adopting digital technology here is being wasted. Consider that
our e-commerce spending at $10bn in 2023 was far below Bangladesh’s $16bn due to barriers
such as limited POS infrastructure and low digital literacy.
It is against this background that the Asian Development Bank’s new study, Pakistan’s Digital
Ecosystem: A Diagnostic Report, suggests an array of fiscal and bank financing incentives, as well
as simplified tax and foreign exchange regimes, to encourage digital transactions, support tech
start-ups, promote e-commerce and attract global ICT investment and venture capital into the
country. The proposals include decreasing GST on digital dealings to 5pc to accelerate digital
payments and hence reduce cash-based inefficiencies in the economy.
The study also proposes cutting corporate income tax and the cost of doing business for SMEs
by 10pc for the next decade, conditional on digital registration and transactions. A ‘Data
Exchange Layer’ and full adoption of the ‘Pakistan Digital Stack’ are advised to digitise
governance and regulation, as well as the allocation of at least 15pc of bank loan portfolios for
SMEs, with half earmarked for digital and ICT businesses, in order to provide low-interest loans
and guarantees to tech firms. It also proposes capping payroll taxation at 15pc of income for
ICT-exporting firms and offering tax credits for hiring local talent and a capital gains tax
exemption on investments in tech start-ups.
Indeed, the proposals do not align with the main goals of fiscal consolidation of the $7bn IMF
programme. The FBR will also resist such steps as they are likely to cause a big dent in its
revenues without alternative tax mobilisation sources to make up for potential losses.
Nevertheless, it should be stressed that Pakistan and its economy stand at a point where they
need to shift to digital technology and move out of recurring crises. The challenges
notwithstanding, digital technology affords Pakistan a unique opportunity to transform itself
into a dynamic digital economy to boost productivity and competitiveness, improve governance
and empower its citizens.
1. Unleash – To release or bring out something powerful or full of potential.
2. Comprehensive – Covering all or nearly all aspects of something thoroughly.
3. Ecosystem – A complex system where different elements (like technology,
finance, and infrastructure) work together.
4. Fiscal – Related to government revenue, taxes, and financial policies.
5. Incentives – Benefits or rewards offered to encourage specific actions or
behaviors.
6. Consolidation – The act of strengthening or unifying something, especially
finances or power.
