Pakistan sees Rs316.88 billion weekly increase in broad money supply

ISLAMABAD: Broad money (M2), which is the most commonly used measure of money supply in Pakistan, saw a notable increase of Rs316.88 billion week-on-week (WoW), bringing the total to Rs36.34 trillion as of November 29.

However, if we compare this to June, M2 has dropped by Rs215.67 billion, down from Rs36.55 trillion at the close of previous fiscal year.

The amount of currency in circulation fell by Rs109.68 billion WoW, dropping to Rs9.03 trillion by the conclusion of November. Year-to-date currency in circulation has decreased by Rs118.12 billion, down from Rs9.15 trillion recorded at the end of June 2024.

When we look at the proportion of M2 made up by currency in circulation, it stood at 24.86 per cent as of November 29, slightly down from 25.39 per cent the previous week and 25.04 per cent at the end of June 2024.

Meanwhile, total deposits with banks increased by Rs420.17 billion WoW, bringing the total to Rs27.18 trillion. However, compared to start of the fiscal year, deposits have decreased by Rs85.61 billion. It is worth noting that these deposits exclude interbank deposits, government accounts and foreign constituent deposits.

In simple terms, currency in circulation refers to the physical banknotes and coins that are in the hands of the public and financial institutions. In Pakistan, M2 is the go-to indicator for tracking broad money.

From a broader perspective, M2 consists of currency in circulation, deposits from the non-government sector (including foreign currency deposits held by residents), and other deposits with the SBP.

On the asset side, M2 reflects the sum of the banking system’s net domestic and foreign assets, which includes the SBP and scheduled banks.

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