Pakistan’s Real Effective Exchange Rate (REER), a measure of the value of a currency against a weighted average of several foreign currencies, witnessed a decrease as it clocked in at 98.65 in September 2024, down from 100.13 (revised) in August 2024, data released by the State Bank of Pakistan (SBP) on Monday showed.
This is the first time in 2024 that the REER value fallen below 100. In December 2023, the REER index was recorded at 98.82.
A REER above 100 means the country’s exports are uncompetitive, while imports are cheaper. The situation reverses when REER stands below 100 on the index.
REER index values in 2024
- January: 101.75
- February: 102.09
- March: 104.09
- April: 104.44
- May: 100.68
- June: 100.06
- July: 101.50
- August: 100.13
- September: 98.65
As per SBP’s latest data on Monday, the REER depreciated 1.48% month-on-month (MoM) in September 2024.
When compared with September 2023, the REER value increased by 7.5%, when it stood at 91.73.
The SBP says a REER index of 100 should not be misinterpreted as denoting the equilibrium value of the currency.
“Movement of the REER away from 100 simply reflects changes relative to its average value in 2010 and is unrelated to its equilibrium value,” the central bank said in an explanatory note on the topic.
Pakistan’s REER index increases to 101.5 in July 2024
Meanwhile, the Nominal Effective Exchange Rate Index (NEER) decreased by 0.82% MoM in September 2024 to a provisional value of 37.84 from 38.15 (revised) in August 2024.
On a yearly basis, the NEER index rose nearly 3% from the value of 36.78 in September 2023.
What is REER?
As per the central bank, REER is an index of the price of a basket of goods in one country relative to the price of the same basket in that country’s major trading partners.
“The prices of these baskets expressed in the same currency using the nominal exchange rate with each trading partner. The price of each trading partner’s basket is weighted by its share in imports, exports, or total foreign trade,” the SBP website says.
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