The Real Effective Exchange Rate (REER) of Pakistan, a measure of the value of a currency against a weighted average of several foreign currencies, decreased to 95.6 in October 2021 compared to 95.9 recorded in September 2021, informed the State Bank of Pakistan (SBP) on Friday.
The REER declined 0.3% on a monthly basis and 7.2% from its recent peak in April 2021, the SBP added.
The index decreased 1.56% in October 2021 against the value of 97.10 in October 2020. It has declined by 4.2% since June 2021.
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On the other hand, the Nominal Effective Exchange rate Index (NEER) decreased by 1.49% in October to a provisional value of 55.48, from the revised value of 56.32 in September.
On a yearly basis, the NEER Index has decreased significantly by 6%, as compared to 59.06 recorded in October 2020.
A REER below 100 means the country’s exports are competitive, while imports are expensive. The situation reverses when REER stands above 100 on the index.
As per the International Monetary Fund (IMF), the decrease in REER implies that exports have become cheaper and imports more expensive; therefore, a decrease indicates a gain in trade competitiveness.
Therefore, the latest central bank latest figures suggest that Pakistan’s trade competitiveness has improved as its exports become less expensive.
Pakistan’s REER declines to 97.4 in August
Pakistan exports in October 2021 grew by 17.5% to $2.471 billion compared to $2.104 billion n the same month last year, shared the Ministry of Commerce.
For the Jul-Oct 2021 period, Pakistan’s exports grew by 25% to $9.468 billion as compared to $7.576 billion during Jul-Oct 2020.
However, imports increased 60% to $6.247 billion during October, whereas during Jul-Oct 2021, imports increased by 64% to $24.99 billion compared to $15.19 billion.
The higher increase in imports has put pressure on the trade deficit, which has in turn added strain on the current account.
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