Currency in circulation falls to lowest GDP percentage in nearly 10 years

ISLAMABAD: Pakistan’s Currency in Circulation (CiC) has fallen to its lowest level as a percentage of Gross Domestic Product (GDP) in nearly a decade.

As of August 30, 2024, CiC stood at Rs8.88 trillion, reflecting a decrease of Rs273.82 billion during the current fiscal year, according to provisional accounts from the State Bank of Pakistan (SBP).

Despite this decline, the current CiC amount is still notably higher than the 10-year average of Rs5.81 trillion.

According to Mettis Global, the peak of CiC reached Rs9.4 trillion in June 2024, largely due to the Eid-ul-Adha festivities. Since then, it has dropped by Rs517.53 billion, following typical seasonal patterns.

As a proportion of Broad Money (M2), which is a key measure of the money supply, CiC has decreased to 24.93 per cent, a level not seen since early 2016. When compared to GDP, CiC is now 8.37 per cent, its lowest since the fiscal year 2015.

This decrease may be influenced by factors beyond seasonal changes. There has been a noticeable increase in public savings in banks, with total deposits rising by 17.6 per cent year-on-year to Rs30.71 trillion as of August 2024.

Additionally, the growing use of digital payment methods has contributed to this shift.

In the third quarter of FY24, digital transactions, including ATM withdrawals, accounted for 83 per cent of the 844 million total retail payments processed by banks and electronic money institutions (EMIs).

The remaining 17 per cent were over-the-counter transactions at bank branches. The digital payment system, particularly through Raast, has enhanced the efficiency, accessibility, and security of financial transactions in Pakistan.

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