Pakistan’s Real Effective Exchange Rate (REER) decreased by 1 percent to 85.6 in March 2023.
According to the latest monthly data released by the State Bank of Pakistan (SBP), the trend indicates a slight decrease from 86.5 recorded in February 2023.
The REER index depreciated to 85.6 in Mar 23 as compared to 86.5 in Feb 23. For details seehttps://t.co/0pjvdnFNYwhttps://t.co/Ird7FDRPyG pic.twitter.com/dd7ofesfj7
— SBP (@StateBank_Pak) April 19, 2023
A REER above 100 indicates a loss in trade competitiveness with exports becoming more expensive and imports getting cheaper, while a REER below 100 means the country’s exports are competitive.
Pakistan’s current REER value of 85.6 suggests that exports offer better returns, but with raw material and machinery imports largely unavailable due to import restrictions, Pakistan’s exports have declined compared to last year.
Another side of the REER spectrum shows that the Pakistani Rupee (PKR) is greatly undervalued. This suggests that while exports are theoretically more competitive at the current level of REER, the returns would still be marginal as a local unit has undesirably weak fundamentals. Volumetric conversion of profits to PKR would only decrease the realized value of earnings.
Follow ProPakistani on Google News & scroll through your favourite content faster!
Support independent journalism
If you want to join us in our mission to share independent, global journalism to the world, we’d love to have you on our side. If you can, please support us on a monthly basis. It takes less than a minute to set up, and you can rest assured that you’re making a big impact every single month in support of open, independent journalism. Thank you.
28010106738320