Pakistan’s REER declines to 96.84 in March

Pakistan's Real Effective Exchange Rate (REER), a measure of the value of a currency against a weighted average of several foreign currencies, decreased significantly as it clocked in at 96.84 in March 2022, down from 97.82 in February 2022, data released by the State Bank of Pakistan (SBP) showed.

A REER below 100 means the country’s exports are competitive, while imports are expensive. Therefore, a decrease indicates a gain in trade competitiveness. The situation reverses when REER stands above 100 on the index.

As per the latest data by the SBP, the REER decreased 1.01% on a monthly basis, and stands 5.94% below 102.95 recorded in April 2021. The index registered a year-on-year decrease of 3.99 points in March 2022 against the value of 100.82 recorded in March of the previous year.

REER increases marginally to 97.03 in January 2022

Pakistan has seen a widening current account deficit amid a rise in its import bill, led by an increase in oil prices in the international market, adding pressure on the external front and negatively impacting the exchange rate.

As per the SBP, during the nine-month period of the ongoing fiscal year (July-March of FY22), the current account deficit stood at $13.17 billion compared to a deficit of only $275 million during the same nine months of the previous fiscal year (FY21), showed SBP data.

In March, Pakistan's import bill continued to surge as the import of goods increased to $6.244 billion, up from $5.143 billion in February. On the other hand, Pakistan's exports of goods during the month of March stood at $3.072 billion, up from $2.888 billion in February.

Meanwhile, remittances during March 2022 stood at $2.81 billion, up by 3% YoY and 28% MoM.

As the country struggles to increase its foreign exchange reserves, the government has set its eyes on a successful revival of the $6-billion International Monetary Fund's Extended Fund Facility, which would pave way for an inflow of $900 million.