Cash in circulation reaches Rs9.4tr

Reflects cash dependency while gold prices hit record highs and rupee loses 3 paisa hitting 278.75/$

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KARACHI:

Cash in Circulation (CiC) in Pakistan has reached a significant amount of approximately Rs9.4 trillion.

This surge highlights growing liquidity in the economy, signalling an increase in demand for physical currency as opposed to the global trend of digitisation.

"CiC is on a rising trend, reaching a high of around Rs9.4 trillion," said the Research Head of Optimus Capital Management, Maaz Azam.

The latest trends in Pakistan's Broad Money (M2) indicate steady growth over the past year, with M2 reaching Rs34.9 trillion as of January 17, 2025, showing a year-on-year increase of Rs2.7 trillion, according to the State Bank of Pakistan (SBP). Within this, CiC has consistently grown, now standing at Rs9.376 trillion, contributing 26.9% of M2.

Historically, CiC has maintained an upward trend since mid-2023, rising from Rs9.1 trillion in June 2023 to its current high of Rs9.4 trillion. The share of CiC in M2 has remained around the 26%-27% range, reflecting persistent cash dependency in the economy despite growing digital banking adoption.

Experts say this rise in CiC reflects increased liquidity needs and signals challenges in the formalisation of financial transactions. Such patterns underscore a consistent rise in cash reliance amid broader monetary expansion, with implications for policy adjustments and financial sector strategies.

This rising trend in CiC highlights liquidity pressures in the economy, coupled with limited banking penetration.

Meanwhile, after a decline in the previous session, gold prices in Pakistan rebounded on Friday, mirroring the rise in global rates. In the local market, the price of gold per tola surged by Rs2,900, reaching a new record high of Rs289,600.

Similarly, 10-gram gold was priced at Rs248,285, marking an increase of Rs2,486, as per the rates provided by the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA).

On Thursday, the price of gold had fallen by Rs750, settling at Rs286,700.

Meanwhile, international gold prices also saw a rise on Friday. According to APGJSA, the global price stood at $2,772 per ounce (with a premium of $20), marking an increase of $29 during the day.

Moreover, the Pakistani rupee remained mostly steady against the US dollar, edging down by 0.01% in the interbank market on Friday.

At closing, the currency stood at 278.75, reflecting a slight decline of 3 paisa against the greenback.

The SBP reported that the rupee had closed at 278.72 on Thursday.

On the global front, both the Australian and New Zealand dollars saw gains on Friday, along with the yuan, in response to comments from US President Donald Trump indicating a potentially softer approach to tariffs on China. Meanwhile, the yen remained cautious ahead of an upcoming rate decision by the Bank of Japan (BOJ).