Cash holdings in Pakistan declined by roughly Rs. 1 trillion during the first three months of the financial year 2023-24, according to the latest data by the State Bank of Pakistan (SBP).
“Almost Rs. 1 trillion fall in cash holdings in Pakistan in the last 3 months. According to the latest numbers, CiC is down from Rs. 9.2 trillion to Rs. 8.3 trillion in the last 3 months. CiC as a percentage of Money Supply and year-on-year growth basis also falling,” said CEO Topline Securities Mohammed Sohail.
Almost one trillion rupee fall in cash holdings in Pakistan in the last 3 months. According to the latest numbers, CiC is down from Rs9.2 trillion to Rs8.3 trillion in the last 3 months. CiC as % of Money Supply and year on year growth basis also falling@StateBank_Pak @1sakhtar pic.twitter.com/fJCuKu1Qec
— Mohammed Sohail (@sohailkarachi) October 4, 2023
SBP data reveals that broad money (M2) decreased by Rs. 418 billion to Rs. 31.1 trillion in 1QFY24, indicating an overall supply contraction of 1.33 percent from Rs. 31.5 trillion at the end of FY23 (June).
The currency in circulation dropped by nearly Rs. 780 billion to Rs. 8.37 trillion in the first three months of FY24, an 8.5 percent decrease from Rs. 9.148 trillion in total currency stock in end-June FY23. Meanwhile, total deposits with local banks stood at Rs. 22.3 trillion, representing a CiC-to-bank deposit ratio of 37.5 percent.
Economic analyst A H H Soomro told ProPakistani,
The opportunity cost of cash is really high given ultra-high interest rates. With subdued economic activity, cash holders are disincentived amid higher inflation. More needs to be done. Demonetization is an eventuality.
CiC as a percentage of Money Supply (M2) is at 27 percent, and according to trends witnessed in 1QFY24, CiC started falling after new Budget provisions activated a standard fee on cash withdrawals by non-filers, which probably drove people to hoard cash in banks.
The current property market slump coupled with the decline in ‘wealth for tax avoidance’ has likely caused a big dip in the net stock of cash holdings.
Meanwhile, net domestic assets of the banking system show a decrease of Rs. 517 billion for 1QFY24, compared to an increase of Rs. 655 billion a year earlier.
Net foreign assets of the banking system increased by Rs. 98.6 billion during the first three months of FY24.
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oh now they are saying Pakistan’s Cash depletion is one guest the who are those the Leaders of the Pakistan coalition who all wise put money in their banks and gave the public the financial reason the country could have been so successful we could been the envy of the Muslims world