January 20, 2022 (MLN): The Real Effective Exchange Rate (REER) of Pakistan decreased to 96.7 in December 2021, a decline of 1.85% compared to 98.5 recorded in November 2021, the latest monthly data published by the State Bank of Pakistan (SBP) showed on Thursday.
Similarly, the index decreased 0.42% in December 2021 against the value of 96.3 in December 2020.
Cumulatively, REER has declined by 3% since June 2021 and 6% from its recent peak in April 2021, implying that Pakistan's goods become more competitive in the international markets.
REER is a measure of the value of a currency against a weighted average of several foreign currencies, a decrease in REER implies that exports have become cheaper while imports become more expensive therefore, this decrease indicates an increase in trade competitiveness.
On the other hand, the Nominal Effective Exchange rate Index (NEER) decreased by 1.5% in December 2021 to a provisional value of 54.52 from the revised value of 55.35 in November 2021. On a yearly basis, the NEER index witnessed a drop of 7% from the value of 58.62 in December 2020.
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