Money Supply increases by Rs2tr in February

Elias D. Lafrance

March 31, 2022 (MLN): The total money supply circulating within the economy during the month of February 2022 has been recorded at around Rs28 trillion, according to provisional accounts on Monetary Aggregates for the month, maintained by the State Bank of Pakistan (SBP).

The money circulating within the economy until January 2022 was Rs28.1tr whereas, until the corresponding month of last year, the figure was Rs25.9tr. This means that the money supply has increased by 8% YoY whereas, on a monthly basis, it largely remained unchanged.

Having broken down the overall money supply into broad categories, the SBP data shows that Rs7.01tr were circulated as notes while Rs13.1tr accounted for transferable deposits which comprise all deposits that are exchangeable on demand at par without penalty/restriction.

The currency circulated as notes which have been high in Pakistan relative to other developed and emerging economies because of the high informal economy rose by over Rs0.59tr or 9% over the year.

Meanwhile, it is worth mentioning that in 2018 when the PTI government came into power, the total currency in circulation in the country was approximately Rs4.3tr. From then until the beginning of the Covid period in March 2020, this figure has surged to Rs5.6tr. In May 2020, notes in circulation crossed the Rs6tr mark, and since then it has consistently stayed above that mark.

This reflects higher cash withdrawals by depositors to meet needs amid pandemics. Moreover, Cash distributing schemes amid Covid-19 as a relief measure can also be considered as a significant contributor to the surging circulation of currency.

Apart from this, other deposits constituted Rs3.95tr in February 2022, up by 13% YoY while down by 1% MoM. Other deposits represent all claims other than transferable deposits in national or foreign currency that are represented by evidence of deposits.

Similarly, coins in circulation increased slightly by 8% YoY to Rs9 billion in February 2022. While, on monthly basis, it inched up by 1%.

Furthermore, Rs182bn worth of deposits were held with post offices, down by 31%YoY and 3% MoM, while National Saving Schemes held Rs3.7tn, marking a decline of 6% YoY whereas, on a monthly basis, it remained stable.

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