KARACHI: The increase in net foreign assets (NFA) of the banking system and government borrowing for budgetary support resulted in additional money supply as 2 growth decline has slowed down during July 1-September 12, 2009.According to details, the M2 growth dropped by Rs37.2 billion or 0.72 per cent during the aforementioned period from a decline of Rs74.5 billion or 1.45 per cent during the previous week ended September 5, 2009.A healthy surge in NFA was witnessed during the week that increased to Rs125.6 billion on September 12, 2009 from Rs96.8 billion on September 5, 2009 showing an addition of Rs28.8 billion.

The increase is attributed to portfolio investments under Special Convertible Rupee Accounts (SCRAs), extra financial assistance from IMF and donors and increasing workers' remittances. The foreign portfolio investment (FPI) continued to enter into Pakistan's equity markets as foreigners invested $111.7 million during the first 11 days of September 2009 while net FPI stood at $213 million from July 1 to September 18, 2009.

Extra financial assistance from IMF in addition to the commitment of $7.4 billion and pledges by the 'Friends of Democratic Pakistan' would help NFA growing in the days to come. The government borrowing for budgetary support also rose from Rs146 billion on 05-09-2009 to Rs163.9 billion on 12-09-2009, where credit retirement by the corporate sector reduced to Rs88 billion from Rs101 billion during the period.

The improvement in liquidity can be seen from the positive impact of increase in currency in circulation of Rs18.3 billion to Rs86.8 billion and replenishment of Rs19 billion in banking deposit money that resulted in improvement in M2 growth.