What is the cost of cash?

The currency in circulation in Pakistan is over Rs9.4 trillion as of 2025 and has been hovering in this range for the last two years. Relative to broad money, currency in circulation is in the range of 26-27 per cent. Currency in circulation can be defined as the currency notes and coins held by the public, effectively existing outside the banking system. Broad money includes currency in circulation, bank deposits, and more. The higher incidence of currency in the economy effectively implies the existence of a large informal economy that creates its own set of challenges. Such challenges would include the existence of an economic segment that is able to avoid any kind of direct taxation while also constrained in its ability to reallocate capital to more productive export-oriented endeavours rather than service-oriented activities.