PAKISTAN'S REER INDEX FALLS TO 98.65

In September 2024, the Pakistani Rupee’s Real Effective Exchange Rate (REER) Index fell by 1.48% to a provisional value of 98.65, down from the revised value of 100.13 in August. According to the State Bank of Pakistan (SBP), this still represents a 7.54% increase compared to September 2023.

Similarly, the Nominal Effective Exchange Rate (NEER) Index decreased by 0.82% in September, standing at a provisional value of 37.84, down from 38.15 in August. Over the past year, the NEER index has risen by 2.87%.

During this period, the PKR closed September 2024 at 277.71 per USD, showing an appreciation of 0.3% compared to August and 3.61% compared to September 2023.

Key Definitions:

REER (Real Effective Exchange Rate): A price index measuring the relative price of a basket of goods in Pakistan compared to those in its major trading partners. An increase in REER means that Pakistan’s exports become more expensive, and imports become cheaper, negatively affecting trade competitiveness.
NEER (Nominal Effective Exchange Rate): An index representing the value of Pakistan’s currency relative to a basket of currencies of its major trading partners, reflecting changes in nominal exchange rates.

Although REER and NEER provide insights into trade competitiveness and currency valuation, a REER value of 100simply reflects the currency’s value at a chosen point (2010, in this case) and is unrelated to the currency’s equilibrium level. The movement of these indices away from 100 reflects relative changes rather than a true “equilibrium” value.