Currency in Circulation Down By Rs. 212 Billion So Far in FY24

Cash holdings in Pakistan have declined by Rs. 212 billion in the financial year 2023-24 to date, according to the latest data by the State Bank of Pakistan (SBP).

SBP data reveals that broad money (M2) increased by Rs. 25.3 billion to Rs. 33.9 trillion as of 17 May 2024, indicating an overall supply increase of 7.7 percent from Rs. 31.5 trillion at the end of FY23 (June).

The currency in circulation dropped by nearly Rs. 212 billion to Rs. 8.9 trillion in FY24 so far, a 2 percent decrease from Rs. 9.148 trillion in total currency stock in end-June FY23. Meanwhile, total deposits with local banks stood at Rs. 24.88 trillion, representing a CiC-to-bank deposit ratio of 35.8 percent.

CiC as a percentage of Money Supply (M2) is at 26.3 percent. Notably, CiC started falling after FY24 Budget provisions activated a standard fee on cash withdrawals by non-filers, which probably drove people to hoard cash in banks.

Meanwhile, net domestic assets of the banking system show an increase of Rs. 2.1 trillion FYTD, compared to an increase of Rs. 3.9 trillion a year earlier.

Net foreign assets of the banking system have increased by Rs. 319 billion so far in FY24.

It bears mentioning that the federal government is likely to increase the advance tax on cash withdrawal by non-filers from banks in the next fiscal year budget on IMF demands. Sources told ProPakistani earlier this month that if parliament approves this tax proposal, the Federal Board of Revenue could collect over Rs. 15 billion annually in revenue from non-filers.

However, the local mood is many individuals may opt to remove sizeable chunks of their money from their bank accounts in case the government decides to increase tax on cash withdrawals. Resultantly, CiC will increase again and dent deposits in local banks.

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