Pakistan’s documented currency in circulation (CiC) has undergone a substantial decline, currently amounting to Rs. 8.5 trillion. This decline is indicative of a reduction in informal cash holdings and cash-based transactions within the nation. As of August 2023, CiC, which encompasses physical cash held by individuals and may also include cash with banks, accounts for 10 percent of the country’s GDP.
According to data provided by the State Bank of Pakistan (SBP), CiC has seen a decrease of nearly Rs. 700 billion in the initial two months of the fiscal year 2023-24. This signifies a significant reduction from the total currency stock, which amounted to Rs. 9.148 trillion at the conclusion of June in FY23.
This downward trend in CiC is a noteworthy economic shift for Pakistan. It suggests a move towards a more formalised and digital financial landscape, with individuals and businesses relying less on physical cash. Such a transition can have various implications, including increased transparency, greater financial inclusion, and potentially reduced opportunities for illicit financial activities.
The State Bank of Pakistan’s monitoring and analysis of CiC will continue to provide valuable insights into the evolving financial landscape of the country. It remains to be seen how this trend will impact the overall economy and the daily financial transactions of Pakistani citizens in the coming months and years.