An Analysis of the Cash Cycle in Pakistan

Cash processing plays a crucial role in Pakistan’s financial system, ensuring liquidity, security, and public confidence in an economy where physical currency remains widely used. Despite the growing adoption of digital financial services and a determined push by the government to reduce dependency on cash, it continues to dominate daily transactions, particularly in the informal sector (which generates over 40% of GDP).

Efficient management of currency, therefore, remains essential to maintaining financial stability.

The State Bank of Pakistan (SBP), through the SBP Banking Services Corporation (SBP-BSC), oversees the issuance, distribution, and quality assurance of banknotes and coins. As of FY24, currency in circulation stood at PKR 10.93 trillion (c. $40 billion), reflecting the country’s continued dependence on physical cash.

Currency in circulation - 2020-2025 (source: SBP).

SBP manages the full lifecycle of banknotes – from production and circulation to withdrawal, destruction, and replacement of unfit notes. Counterfeit detection is also a priority. Under its Clean Note Policy, SBP requires banks to deploy modern authentication technologies and forensic support to detect and isolate counterfeit notes. A dedicated smartphone application further assists the public in verifying security features. Although detailed counterfeit statistics are not publicly released, official statements suggest that the rate of detected counterfeits has remained relatively stable over the past two years.