PKR’s Real Effective exchange rate Index at a 5 year low in July 2018

The Rupee’s Real Effective Exchange Index fell to 108.3716, which is its lowest value since June 2013.

According to data released by the State Bank of Pakistan, the REER decreased by 2.53 percent compared to June 2018 when it was at 111.1798.

Similarly the Nominal effective exchange rate Index (NEER) was at 77.1095 in July, a decrease of 3.27 percent compared to June 2018.

The effective exchange rate measures a currency against a basket of other currencies.

A decrease in REER implies that exports have become cheaper while imports have become more expensive which indicates a gain in trade competitiveness.

PKR’s REER was as high 127.44 in April 2017 with the IMF suggesting that the currency was overvalued by as much as 20% and contributing to its declining exports.

The government has devalued PKR by more than 17% since December 2017 and raised the policy rate by 175 basis points in an attempt to control the country’s current account deficit.

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