[vc_row][vc_column][vc_column_text dp_text_size=”size-4″]In July 2023, Pakistan’s Real Effective Exchange Rate (REER) experienced a notable increase, surging by 3.86 percentage points to reach 91.59. The latest monthly data provided by the State Bank of Pakistan (SBP) reveals a substantial rise from the previous month’s figure of 87.73 in June 2023.
A REER value exceeding 100 signifies a decline in trade competitiveness, leading to higher export costs and more affordable imports. Conversely, a REER below 100 indicates improved export competitiveness.
With the current REER value of 91.59, Pakistan’s exports seem promising on paper. However, the importation of raw materials and machinery remains sluggish despite the relaxation of import restrictions. The federal government eliminated all import restrictions nearly two months ago, but the process of ramping up local production will take time to achieve the desired volume.
Also Read: The annual rate of inflation is 34.05%.
On the other side of the REER spectrum, the Pakistani Rupee is significantly undervalued. This suggests that while exports, though constrained, could be more competitive given the current REER level, the resulting returns would still be modest.
As the rupee continues to depreciate against the US Dollar this month, the conversion of profits into PKR based on volume would only diminish the actual earnings realized.[/vc_column_text][/vc_column][/vc_row]
