Pakistan’s Real Effective Exchange Rate (REER) stood at 102.27 in February 2025, reflecting a decline from 104.06 recorded in January 2025, according to the latest data issued by the State Bank of Pakistan (SBP).
What is REER and Why Does It Matter?
The REER Index is a key indicator used to measure a country’s trade competitiveness. A REER above 100 suggests a decline in trade competitiveness, making exports more expensive and imports cheaper. Conversely, a REER below 100 signals that a country’s exports are competitive in the global market.
Implications of REER Drop
- The slight decrease in REER indicates a potential improvement in export competitiveness for Pakistan.
- A lower REER can support export-oriented industries by making Pakistani goods more affordable internationally.
- However, a persistent REER above 100 could challenge trade competitiveness, putting pressure on the current account balance.
Economic Outlook
With Pakistan’s REER hovering above 100, economic analysts suggest that policymakers may focus on measures to boost exports and control import dependency to ensure a balanced trade environment. The SBP continues to monitor exchange rate trends to maintain macroeconomic stability.
The latest REER data from SBP highlights a marginal improvement in Pakistan’s trade competitiveness. However, sustaining a stable exchange rate remains crucial for economic growth. Businesses and investors will keep a close watch on upcoming monetary policies and exchange rate adjustments in the coming months.
