May 19, 2021 (MLN): The total money supply circulating within the economy by the end of March 2021 has been recorded at around Rs26.22trillion, according to provisional accounts on Monetary Aggregates for the month, maintained by the State Bank of Pakistan.

The money circulating within the economy until last month was Rs25.94tr while until the corresponding month of last year, the figure was Rs23.16tr. This means that the money supply has increased 13% over the year and 1.1% over the month.

The growth of money supply continues to accelerate despite sluggish economic growth and lack of credit demand from the private sector. It seems that the higher government borrowing from banks to finance budget deficit led to increase in broad money growth. The increased government borrowing from banks since last year was owing to the huge spending to fight the Covid-19 pandemic. To note, the government borrowing from the banking sector rose by 1.78% in more than nine months of this fiscal year mainly due to the financing of the budget deficit.

Having broken down the overall money supply into broad categories, the SBP data shows that a total of Rs6.52tr were circulated as notes while Rs11.87tr accounted for transferable deposits which comprise all deposits that are exchangeable on demand at par without penalty/restriction.

The currency circulated as notes which has been high in Pakistan relative to other developed and emerging economies because of high informal economy, rose by over Rs0.868tr or 15.35% over the year. To highlight, in May 2020, Notes in circulation crossed the Rs 6 trillion mark, and since then it has consistently stayed above that mark. This reflects higher cash withdrawals by depositors to meet needs amid pandemic. 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 Rs3.57tr in March 2021, up by 9.7%YoY. Other deposits represent all claims other than transferable deposits in national or foreign currency that are represented by evidence of deposits.

On the other hand, coins circulated declined from Rs9.22billion in March 2020 to Rs8.49bn in March 2021. While, on monthly basis, it is increased by nearly 1.5% MoM from Rs8.36bn.

Furthermore, Rs258.42bn worth of deposits were held with post offices while National Saving Schemes held Rs3.98tr, marking a growth of 3.64% YoY from Rs3.84tr.

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