PKR's REER index increases to 107.9 in July

August 18, 2026 (MLN): Pakistan’s Real Effective Exchange Rate (REER) increased to 107.92 in July 2026, up 1.49% from 106.33 in June, marking the fourth consecutive monthly increase and extending the recovery in the rupee’s real external value.

The latest data show that Pakistan’s Nominal Effective Exchange Rate (NEER) also strengthened during the month, rising 0.47% to 38.32 from 38.14 in June.

Meanwhile, the rupee remained broadly stable against the US dollar, with the USD/PKR rate easing to 277.80 in July from 278.16 in June.

The simultaneous increase in REER and NEER indicates that the rupee’s effective exchange-rate position strengthened during July, while movements in domestic prices also played a role in the real exchange-rate adjustment.

REER records fourth consecutive monthly increase

The REER rose from 106.33 in June to 107.92 in July, representing a monthly increase of 1.59 points or 1.49%.

This followed increases in each of the previous three months:

• April 2026: REER rose to 105.84 from 104.29 in March.

• May 2026: increased further to 106.08.

• June 2026: climbed to 106.33.

• July 2026: reached 107.92.

The July reading was the highest REER level since at least the period covered by the available 2023–2026 data, and represents a significant recovery from the sharp depreciation-driven decline recorded in 2022 and early 2023.

On a year-on-year basis, REER was 7.94% higher than the July 2025 level of 99.98.

REER remains below pre-depreciation levels

Despite the recent recovery, Pakistan’s REER remains below the levels recorded before the major currency adjustment that began in 2018.

The REER stood at 118.52 in August 2017, the highest level in the supplied dataset. It subsequently declined sharply, reaching 85.56 in April 2023, reflecting the substantial weakening of the rupee’s real external value over that period.

From the April 2023 low, the REER has recovered by around 26.1%, reaching 107.92 in July 2026.

However, the latest reading remains approximately 8.9% below the August 2017 level, indicating that the rupee has not fully returned to its earlier real effective valuation.

NEER also strengthens in July

Pakistan’s NEER increased to 38.32 in July 2026 from 38.14 in June, representing a 0.47% monthly increase.

The July reading was also 2.18% higher year-on-year, compared with 37.51 in July 2025.

The NEER measures the value of the rupee against a weighted basket of trading-partner currencies without adjusting for relative inflation.

An increase in the index therefore indicates an improvement in the rupee’s nominal effective exchange-rate position under the index methodology.

The latest increase extends the gradual recovery seen since 2023, when NEER had fallen to much lower levels following the sharp depreciation of the rupee.

NEER remains well below 2017 levels

The long-term movement in the NEER has been considerably more dramatic.

The index stood at 90.27 in August 2017 and reached a peak of 90.60 in November 2017 in the supplied series.

It subsequently declined sharply, falling to 36.72 in August 2023, its lowest level in the dataset.

At 38.32 in July 2026, NEER has recovered around 4.4% from the August 2023 low, but remains roughly 57.7% below the November 2017 peak.

This highlights the scale of the structural adjustment in Pakistan’s nominal effective exchange rate over the past decade.

Dollar-rupee rate remains broadly stable

The domestic exchange rate showed comparatively limited movement in July.

The USD/PKR rate fell to 277.80 in July from 278.16 in June, representing a monthly appreciation of around 0.13% for the rupee against the US dollar.

On a year-on-year basis, the rupee was around 1.79% stronger, with USD/PKR declining from 282.87 in July 2025 to 277.80 in July 2026.

The relative stability of the bilateral exchange rate contrasts sharply with the large movements observed during 2022–23.

The dollar rate climbed from around 176.72 in January 2022 to 239.37 in July 2022, before reaching 267.89 in January 2023 and 305.54 in August 2023.

Since then, the exchange rate has remained substantially more stable, with the latest data showing USD/PKR close to the 278 level.

Inflation remains an important factor

The July REER increase occurred alongside a 1.2% month-on-month increase in the CPI.

The combination is important because REER incorporates movements in domestic prices relative to those of trading partners as well as changes in the nominal exchange rate.

Pakistan recorded particularly sharp price movements during the 2022–23 period. CPI month-on-month inflation reached 6.3% in June 2022, followed by 4.4% in July and 2.5% in August.

The subsequent currency depreciation and inflation shock contributed to significant movements in the country’s effective exchange-rate indicators.

By contrast, the exchange rate has been considerably more stable in 2024–26, while monthly inflation has generally moderated from the extreme levels seen during the earlier crisis period.

The rise in REER to 107.92 suggests that the rupee experienced a real appreciation during July, meaning its value relative to the currencies of major trading partners increased after accounting for relative price movements.

A higher REER can have mixed implications for the economy.

For importers and domestic consumers, a stronger real exchange rate can improve purchasing power for imported goods and reduce the local-currency cost of foreign inputs, particularly when the bilateral exchange rate is stable.

For exporters, however, sustained real appreciation can put pressure on price competitiveness because Pakistani goods may become relatively more expensive compared with products from competing economies.

The key issue is therefore whether the rise in REER reflects improved macroeconomic stability and productivity or a currency position that could eventually weaken export competitiveness.

The REER, after falling to 85.56 in April 2023, has recovered to 107.92 by July 2026. Over the same period, NEER has moved from around 36.78 in April 2023 to 38.32 in July 2026, while the dollar rate has moved from 283.84 to 277.80.

The recovery has therefore been much more pronounced in the REER than in the NEER, reflecting the influence of relative price movements alongside nominal exchange-rate changes.

In the latest month, the pattern remained consistent: REER rose 1.49%, NEER increased 0.47%, while USD/PKR declined 0.13%.

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