Pakistan’s Real Effective Exchange Rate (REER) eased to 103.73 in December 2025, indicating a slight moderation in the rupee’s relative valuation, though it remains above the 10-year average of 103.0, according to market data reported by Topline Securities.
REER measures the value of a country’s currency against a basket of trading partners, adjusted for inflation differentials. A reading above 100 suggests that the local currency is relatively overvalued compared to peer economies, while a lower reading signals improving competitiveness.
Despite the decline, Pakistan’s REER staying above the long-term average indicates that the rupee still carries mild overvaluation pressure against major trading partners.
Looking ahead, Topline expects the Pakistani rupee to strengthen modestly against the US dollar, forecasting the PKR/USD rate to close below Rs. 285 by June 2026.
Market participants say the outlook will depend on sustained foreign inflows, stable remittance growth, controlled imports, and continued policy discipline under Pakistan’s ongoing economic reform framework.
A further decline in REER toward its long-term average could help improve Pakistan’s trade competitiveness while keeping inflationary pressures in check, analysts added.
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Without major structural changes in the economy, the government will remain “ a government of the Elite, by the Elite and for the Elite”.