After recording an expansion of Rs 22 billion on October 29, 2005, money supply rose further to over Rs 33 billion on November 5, according to an update of the State Bank, released on November 21. The increase amounted to about Rs 11 billion over the week.
Of the total increase in money supply so far, Rs 109.8 billion was contributed by domestic credit, while the balancing effect, to restrict the expansion impact to just Rs 33 billion, came from net foreign assets of the banking system, which declined, since the beginning of the year, by Rs76.7 billion.
Over the week, however, the increase of Rs 11 billion in money supply was the result of an expansion of Rs 18.6 billion in domestic partly offset by net usage of foreign assets to the extent of some Rs 7 billion.
Component-wise, the overall increase in money supply was represented by an increase of Rs 89.7 billion in currency in circulation, whose expansion effect to a large extent was neutralised by draw down of deposits of the banking system in the amount of some Rs 57 billion, presumably used to buy foreign exchange by the central bank.
The major component of domestic credit expansion during the year so far was private sector credit, which rose by Rs 105.6 billion to November 5 over its level on June 30, and by Rs 10.7 billion over its level on October 29.
Government borrowing, which amounted to a little over Rs 41 billion on October 29, also rose and reached Rs 47 billion on November 5. Thanks to contraction of credit utilisation under PSEs, SBP credit to NBFIs and undefined other items together amounting to some Rs 43 billion which helped cool down the heat created by government and private sectors and restricted domestic credit to its November 5 level.
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