- A Real Effective Exchange Rate below 100 means a country’s exports are competitive, while imports are expensive
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 95.85 in April 2022, down from 96.66 in March 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 on Tuesday, the REER decreased 0.84% on a monthly basis.
The REER value has declined by 3.94% during the fiscal year to date, and 6.89% from its peak in April 2021 when it stood at 102.95.
Facing a bulging import bill, Pakistan’s trade deficit widened by 57.85% during the first 11 months (July-May) of the outgoing fiscal year 2021-22, and reached $43.334 billion compared to $27.452 billion during the same period of 2020-21, according to data shared by the Pakistan Bureau of Statistics (PBS).
Pakistan’s exports increased by 27.78% and remained $28.848 billion in the first eleven months of the current fiscal year, 2021-22, compared to $22.576 billion during the same period of 2020-21.
Imports increased by 44.28% during the first eleven months (July-May) of the current fiscal year and stood at $72.182 billion compared to $50.028 billion during the same period of the previous year, the PBS stated.
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 and open doors for funding from other international lenders as well.