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Pakistan's Money Supply Soars to Rs38.09 Trillion: A Cash Surge in Hand

Friday, June 20, 2025 | 2:11 AM WIB | 0 Views Last Updated 2025-06-30T16:13:01Z

Pakistan's broad money supply, known as M2, rose to Rs38.09 trillion by June 6, 2025, showing a weekly increase of Rs4.32 billion, according to the State Bank of Pakistan. This marks a significant rise from Rs35.88 trillion recorded at the end of the last fiscal year, meaning the total increase since then has reached Rs2.21 trillion.

M2 is a key measure of liquidity in the economy. It includes both physical currency and non-government deposits held in commercial banks. A rise in M2 often signals increasing liquidity, which can impact inflation, banking activity, and overall economic trends. One of the most noticeable changes this week is the sharp jump in cash held by the public and institutions.

Currency in circulation surged by Rs568.34 billion in just one week, reaching Rs10.83 trillion. This rise brings the cash-to-M2 ratio to 28.45%, up from 26.96% last week and well above the 25.51% recorded a year ago. This trend shows more people are keeping cash rather than placing money in banks, possibly due to concerns about banking reliability or upcoming events like Eid or elections.

On the other hand, total bank deposits fell by Rs562.06 billion to Rs27.21 trillion during the same week. Although there's been a decline, deposits still show an overall increase of Rs541.97 billion since the start of the fiscal year. These figures do not include government, interbank, or foreign institutional accounts, focusing instead on public and business deposits.

Experts say this short-term rise in cash use could be due to seasonal trends or uncertainty in the market. However, if the trend continues, it may affect inflation, interest rates, and the State Bank's future monetary policy. Monitoring how cash and deposits shift in the coming weeks will be key to understanding public confidence in the financial system.

In conclusion, the increase in M2, especially the jump in currency in circulation, signals shifting preferences in how people manage money. Whether this change is temporary or long-term remains to be seen, but it holds important clues for Pakistan's economic direction.

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