Pakistan’s Real Effective Exchange Rate (REER) declined by 1.5 percentage points to 90.1 in August 2023.
According to the latest monthly data released by the State Bank of Pakistan (SBP), the trend indicates a big decrease from 91.6 recorded in July 2023.
— SBP (@StateBank_Pak) September 18, 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 90.1 suggests that exports offer good returns. The federal government lifted all restrictions on imports 3 months ago and it will take some time until manufacturers normalize production and bolster exports.
Another side of the REER spectrum shows that the Pakistani Rupee is still greatly undervalued. This suggests that while exports are more competitive at the current level of REER, the returns would still be marginal unless the currency market shows recovery in later reviews.