Pakistan’s monetary landscape experienced a notable contraction during the second week of April as broad money (M2), the primary indicator of money supply in the country, fell by Rs426.75 billion. Data released by the State Bank of Pakistan (SBP) shows that total M2 stood at Rs42.33 trillion as of April 10, 2026. This weekly dip reflects shifting liquidity dynamics within the financial system, though the broader trend for the fiscal year remains expansionary. When compared to the close of the previous fiscal year in June 2025, the total money supply has grown by Rs1.82 trillion from its starting point of Rs40.51 trillion.
A closer look at the components of M2 reveals a slight increase in the public’s preference for physical cash. Currency in circulation grew by Rs0.15 billion over the week, reaching a total of Rs11.93 trillion. The growth in cash usage is more pronounced when viewed on a fiscal-year-to-date basis, having surged by Rs1.3 trillion since June 2025. This trend has pushed the ratio of currency in circulation as a percentage of total M2 to 28.19%, up from 27.91% in the preceding week. Historically, this ratio stood at 26.25% in June 2024, indicating a gradual but steady increase in the amount of cash held by the general public and financial institutions relative to digital or bank-held funds.
The overall decline in money supply this week was primarily driven by a significant reduction in the banking sector’s deposit base. Total deposits held with banks—which exclude inter-bank, government, and foreign constituent deposits—dropped by Rs427.05 billion over the week to settle at Rs30.35 trillion. Despite this weekly volatility, the deposit base has grown by Rs532.64 billion throughout the current fiscal year. These fluctuations often reflect seasonal business cycles, tax payment deadlines, or shifts in institutional investment strategies that pull liquidity out of standard bank accounts.
In the Pakistani financial context, M2 serves as the comprehensive definition of broad money used for economic planning and inflation forecasting. From a liability perspective, it is calculated by summing the currency in circulation, total non-government deposits (including residents’ foreign currency accounts), and other miscellaneous deposits held with the central bank. Conversely, from an asset standpoint, M2 represents the combined net domestic assets and net foreign assets of the entire banking system, which includes both the State Bank of Pakistan and all scheduled commercial banks operating in the country.
Understanding these shifts is crucial for market analysts monitoring the inflationary environment and the central bank’s potential monetary policy responses. While the weekly drop in deposits contributed to a leaner money supply, the sustained rise in currency in circulation since the start of the fiscal year remains a point of interest for those tracking the formalization of the economy. As the fiscal year 2026 progresses, the SBP’s weekly updates continue to provide a transparent look into how liquidity is moving between the hands of the public and the vaults of the banking system.
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