Glossary · Economy & Macro
Broad Money
A measure of money supply used by the State Bank of Pakistan that includes currency in circulation, deposits with the SBP, and demand and time deposits held with scheduled banks and used to gauge overall liquidity in the economy.
01—What is Broad Money?
The definition — and what it means in practice.
Broad Money (M2) is a measure of the money supply used by the State Bank of Pakistan (SBP). It includes currency in circulation, deposits with the SBP, and demand and time deposits held with scheduled banks. Because it captures both cash and widely used bank deposits, M2 is commonly used as a practical indicator of overall liquidity available to households and businesses in an economy.
M2 matters because changes in liquidity can influence spending, borrowing, and saving behaviour. When broad money expands or contracts, it can affect interest-rate conditions, inflation expectations, and business activity, which may then show up in company revenues, costs, and valuations. For investors, M2 is one macro signal to consider alongside corporate fundamentals and market factors, rather than a standalone timing tool.
If more money sits in people’s wallets and bank accounts (say deposits rise by Rs 100 overall), the economy usually has more liquidity to spend, save, or invest.
- Broad Money (M2) is the SBP’s measure of economy-wide money supply and liquidity.
- It includes currency plus deposits, including demand and time deposits with scheduled banks.
- M2 is watched as a macro indicator, not a direct predictor of a single share’s price.
- Liquidity conditions linked to M2 can feed into interest rates, inflation expectations, and growth.
02—How broad money works on the PSX
The Pakistan-specific rules, conventions, and numbers.
A PSX investor typically encounters M2 as part of macroeconomic commentary tied to monetary policy and market liquidity. Because the SBP uses M2 to gauge overall liquidity, references to “money supply” in Pakistan often mean broad money (M2) rather than only cash in circulation.
In practice, M2 is usually discussed alongside interest-rate and money-market indicators such as KIBOR and broader Monetary Policy. Investors may use these signals to frame expectations about financing conditions for listed companies and the relative attractiveness of equities versus fixed-income instruments, while still relying on company results and disclosures for stock-specific decisions.
03—Common misconceptions
Where investors most often get this wrong.
M2 is just the amount of cash printed and circulating.
M2 is broader than cash. It also includes deposits with the SBP and demand and time deposits held with scheduled banks, which are widely used for payments and savings.
If M2 rises, the PSX must go up.
M2 is one macro liquidity measure. Equity prices also depend on earnings, valuations, risk sentiment, and company-specific factors, so the relationship is not mechanical.
M2 only matters to economists, not retail investors.
Even retail investors may feel M2’s effects indirectly through borrowing costs, consumer demand, and inflation expectations, which can influence company performance and market multiples.
04—Using broad money on BSL
Where this term shows up across the platform — with live data.
- Compare market direction with major benchmarks on KSE-100.
- Check sector-level performance to see where liquidity may be flowing on Sectors.
- Review individual listings and disclosures while doing macro-to-micro analysis on Stocks.
- Screen for companies and filter by fundamentals using the Stock Screener.
05—Frequently asked questions
What investors ask about broad money on the PSX.
Frequently Asked Questions
Broad Money (M2) is the State Bank of Pakistan’s measure of money supply. It includes currency in circulation, deposits with the SBP, and demand and time deposits held with scheduled banks, and is used to gauge overall liquidity in the economy.
No. M2 is a broader measure intended to capture more of the money people and firms can readily use. Narrow money is a tighter concept with fewer components than broad money.
M2 is a high-level indicator of liquidity. Liquidity conditions can influence interest-rate expectations, financing availability, and economic activity, which may affect company earnings and equity valuations on the PSX.
Yes. The SBP’s M2 measure includes demand and time deposits held with scheduled banks, along with currency in circulation and deposits with the SBP.
Not reliably. M2 is a macro measure and does not explain company-specific drivers such as margins, leverage, governance, or competitive position. It is more useful for setting economic context than for selecting a single stock.
06—Related terms
Keep building the picture.
The actions of the State Bank of Pakistan to control money supply and interest rates. Monetary policy decisions directly influence borrowing costs, inflation, and equity market valuations.
The ease with which a security can be bought or sold without significantly affecting its price. High-liquidity stocks have large trading volumes and narrow bid-ask spreads.
A measure of money supply that includes currency in circulation, deposits with the State Bank of Pakistan, and demand deposits held with scheduled banks; a narrower measure of liquidity than M2.
The benchmark interest rate at which banks in Pakistan lend to each other on a short-term basis. Published daily by the SBP and widely used as a reference rate for corporate loans, floating-rate bonds, and other financial instruments.
The cost of borrowing money, set by the State Bank of Pakistan through the policy rate. Rising interest rates generally weigh on equity valuations by increasing the discount rate applied to future earnings.
The segment of the financial market where short-term debt instruments, such as Treasury Bills, commercial paper, and bankers' acceptances, are traded. Provides liquidity management for banks and institutions.
Put the term to work
Open a free BSL trading account
Understand the market, then trade it — live PSX data, screening tools, and a research desk that speaks plain English.