M2 money supply in Pakistan surges by Rs1.27 trillion in a week

ISLAMABAD: Broad money (M2), the key measure of money supply in Pakistan, surged by Rs1.27 trillion week-on-week to reach Rs36.4 trillion as of June 28, 2024, according to provisional data on Monetary Aggregates released by the State Bank of Pakistan (SBP).

Compared to the same period in June 2023, M2 has increased significantly by Rs4.88 trillion from the Rs31.52 trillion recorded at the end of the last fiscal year.

Breaking down the components of M2, the currency in circulation within the economy as of June 28, 2024, fell by Rs282.4 billion week-on-week to Rs9.11 trillion. Throughout the current fiscal year, the currency in circulation has decreased by Rs34.33 billion compared to the Rs9.15 trillion recorded at the end of June 2023.

Currency in circulation as a percentage of M2 stood at 25.04 per cent, down from 26.75 per cent the previous week and 29.02 per cent in June 2023.

Total deposits held with banks increased by Rs1.53 trillion week-on-week to Rs27.13 trillion, marking a fiscal year-to-date increase of Rs4.87 trillion. These figures exclude inter-bank deposits, government deposits, and foreign constituents’ deposits.

Currency in circulation refers to the total banknotes and coins held by the public and financial institutions. In Pakistan, M2 is the most widely used definition of broad money.

It includes the currency in circulation, total deposits of the non-government sector (including residents’ foreign currency deposits), and other deposits with the SBP.

On the liability side, M2 is measured as the sum of currency in circulation and total deposits of the non-government sector. On the asset side, M2 is the sum of net domestic assets and net foreign assets of the banking system, which comprises the SBP and scheduled banks.

Read next: PSX soars to new record high