Pakistan's finance minister is reigniting the conversation about a central bank digital currency (CBDC), a potential game-changer for the nation's economic landscape.

Finance chief Muhammad Aurangzeb highlighted a critical challenge: a vast undocumented economy, estimated at nearly half of Pakistan's total activity. This informal sector hinders tax collection and financial inclusion, especially for women who face issues like cash theft.

Aurangzeb sees a digital rupee as a weapon in this two-pronged battle. It could streamline tax collection by bringing the undocumented economy into the fold. Additionally, digital wallets could empower women by giving them more control over their finances, potentially reducing vulnerability to cash theft.

This push for a digital rupee comes amidst global economic concerns. The International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, expressed worry about widening economic gaps, with some countries like Pakistan struggling.

Pakistan's central bank, the State Bank of Pakistan (SBP), is aiming for a 2025 launch of the digital rupee. Governor Jameel Ahmad emphasizes a cautious approach, prioritizing security and learning from other central banks' experiences.

However, Pakistan's high inflation (over 20%) might be driving citizens towards alternative currencies like crypto. Despite government restrictions, Pakistan ranks high in global crypto adoption. This suggests the SBP might also be looking at the CBDC as a way to compete with crypto and maintain control over the national digital currency.

The global race for CBDCs is heating up, with over 98% of central banks exploring the technology. Pakistan's neighbors like India are already piloting their digital currencies. The SBP needs to act swiftly to avoid falling behind.

The success of Pakistan's digital rupee hinges on its ability to bridge the economic divide. Can it bring the undocumented economy into the fold, empower women, and offer a secure alternative to crypto? Only time will tell, but the potential rewards are significant for Pakistan's financial future.