KARACHI: Currency in circulation (CIC) as a percentage of the GDP fell to a nearly 13-year low as of September 6.
Data from the State Bank of Pakistan on Monday showed that CIC stood at Rs9.09 trillion as of September 6, compared with Rs8.87 trillion in the previous week. CIC recorded at Rs9.15 trillion as of June 30, 2024. CIC has declined when compared with the last fiscal year. However, it is still higher than the 10-year average of Rs5.81 trillion. “Currency in circulation (CIC) in Pakistan has fallen to a near 13-year low as a percentage of the GDP at 8.31 per cent,” said Arif Habib Limited. “The factors that led to this decline include a shift to banking channels due to higher interest rates, higher remittances, the adoption of digital payments, and government crackdowns on informal transactions,” it said.
CIC as a percentage of broad money slightly increased to 25.5 per cent as of September 6 from 24.9 per cent a week ago.The broad money (M2) growth decelerated to 14.6 per cent as of end-August 2024, from 16.1 per cent at end-June, primarily due to more than seasonal retirements in private sector credit (PSC) and commodity operations financing, said the SBP in a monetary policy statement issued last week.
The growth in reserve money, after remaining subdued during FY24, somewhat reversed, but is still lower than its historical trend. From the liability side, deposits remained the mainstay of M2 growth, it said.
“The monetary policy committee (MPC) emphasized that the planned official FX inflows will be critical for the government to reduce its reliance on the domestic banking sector, improve the NFA, and create space for lending to the private sector,” it added. “The MPC also viewed that the currently subdued growth in private sector credit (PSC) may pick up with the ease in financial conditions,” it noted.