July 12, 2021 (MLN): The total money supply circulating within the economy by the end of May 2021 has been recorded at around Rs26.62trillion, 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 Rs26.44tr while until the corresponding month of last year, the figure was Rs24.17tr. This means that the money supply has increased 9.4% over the year and 0.66% over the month.
The growth of the money supply continues to accelerate on the back of increasing economic activities specially after the lifting of lockdown restrictions amid third wave of Covid-19. In addition, the government borrowing from banks to finance the budget deficit led to an increase in broad money growth.
Having broken down the overall money supply into broad categories, the SBP data shows that a total of Rs6.9tr were circulated as notes while Rs12tr accounted for transferable deposits which comprise all deposits that are exchangeable on demand at par without penalty/restriction.
The currency circulated as notes in Pakistan is relatively high to other emerging economies because of the high informal economy. On the yearly basis, circulation of notes jumped by 8.27%.
To note, circulation of currency notes accelerated after the hit of Covid-19 pandemic which had forced the government to take certain relief measures i.e, cash distributing schemes for the welfare of general public, which turned out a significant contributor to the surging circulation of currency.
Apart from this, other deposits constituted Rs3.53tr in May 2021, up by 10.67%YoY. Other deposits represent all claims other than transferable deposits in national or foreign currencies that are represented by evidence of deposits.
On the other hand, coins in circulation declined slightly from Rs9.1billion in May 2020 to Rs8.95bn in May 2021 while, on monthly basis, it showed a meager increment of 0.7% MoM from Rs9bn.
Furthermore, Rs248.25bn worth of deposits were held with post offices while National Saving Schemes held Rs3.89tr, marking a decline of 3.96% YoY from Rs4.05tn.
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