Cash holdings in Pakistan have decreased by Rs. 212 billion in the financial year 2023-24, according to the State Bank of Pakistan (SBP).
SBP data shows that broad money (M2) increased by Rs. 25.3 billion to Rs. 33.9 trillion as of 17 May 2024, indicating a 7.7 percent rise from Rs. 31.5 trillion at the end of FY23 (June).
The currency in circulation dropped by nearly Rs. 212 billion to Rs. 8.9 trillion in FY24 so far, a 2 percent decrease from Rs. 9.148 trillion at the end of FY23. Total deposits with local banks stood at Rs. 24.88 trillion, showing a CiC-to-bank deposit ratio of 35.8 percent.
CiC as a percentage of Money Supply (M2) is at 26.3 percent. The decline in CiC began after the FY24 Budget introduced a standard fee on cash withdrawals by non-filers, likely encouraging people to deposit cash in banks.
Net domestic assets of the banking system increased by Rs. 2.1 trillion FYTD, compared to an increase of Rs. 3.9 trillion a year earlier. Net foreign assets of the banking system rose by Rs. 319 billion so far in FY24.
It is worth noting that the federal government may increase the advance tax on cash withdrawals by non-filers in the next fiscal year budget due to IMF demands. If approved by parliament, the Federal Board of Revenue could collect over Rs. 15 billion annually from non-filers. However, this could lead individuals to withdraw large amounts of money from their bank accounts, potentially increasing CiC and reducing bank deposits.