Sumarry on Currency Cirrculation of Pakistan

Topics: Inflation, Monetary policy, Public finance Pages: 3 (1090 words) Published: December 30, 2011
One of the primary responsibilities of the State Bank is the regulation of currency in accordance with the requirements of business and the general public. The overall affairs with respect to the issuing of notes are conducted through two notionally separate departments of SBP, viz., Issue Department which deals with the issue of notes, and the Banking Department which undertakes general banking business. Of the total amount of the assets of the Issue Department, a stipulated amount, which Government can vary from time to time, is to be kept in the form of gold coins, gold bullion, silver bullion, special drawing rights held with IMF, or approved foreign exchange. The remainder of the assets of Issue Department should consist of rupee coins, rupee securities and the internal bills of exchange and other commercial papers. Issue Department of the SBP BSC (Bank) is responsible to deal with issuance of currency and its management. Each Issue office of the Bank has an Issue Department that is distinct from the Banking Department. The liabilities of the Issue Department are the total amount of the Bank notes in circulation Currency notes worth Rs153.750 billion were printed during the fiscal year 2009-10. The prime reason for this increase in currency in circulation is heavy government borrowings from the State Bank of Pakistan for budgetary support. The government borrowings from SBP essentially mean new money, besides being inflationary. An understanding between SBP and the government to restrict such borrowings at the end-Sept level of Rs1, 290 billion will help in restraining the printing of new notes and to reduce the currency in circulation. If the inflation had increased due to printing of new currency notes it will reduce the financial intermediation. The currency in circulation has increased by Rs263 billion during 2011, showing a year-on-year growth of 19 per cent as on Feb 15, 2011 from June 30, 2010. The currency-to-deposit ratio has also increased to 33...
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