The volume of circulating currency has increased to Rs 1,593.60 billion, as on April 28, 2011 from Rs 1,377.40 billion as on July 2010, ie 16 percent increase which amounts to Rs 216.20 billion. In a written reply to a question in the National Assembly, Finance Minister Hafeez Sheikh said the changes in currency in circulation in the economy are largely influenced by economic activity and change in public's behaviour towards keeping money either in the form of cash or in other assets.
Moreover, several other factors such as inflation and government borrowing from central bank for budgetary support also explain this change. Over the last few years, government borrowing from SBP to finance its rising fiscal deficit has been the major source of increase in currency in circulation.
He said the government was constantly striving to reduce reliance on the borrowing from SBP. He added that the government borrowing from SBP showed some respite from 15th December 2010 up to end March 2011. Its borrowing from SBP as on 01-12-2010 was Rs 293.2 billion, which decreased to Rs 80.1 billion on 31-12-2010 and further reduced to Rs 16.2 billion on 31-3-2011. However, it increased to Rs 122 billion on 15.4.2011, he said.