REER improves to 99.42 points

Pakistan’s real effective exchange rate (REER) – the cost of international trade – further improved to 99.42 points on the index in July, making the country’s exports competitive and imports expensive.

According to a report by The Express Tribune, the improvement in the REER should help narrowing down the country’s trade deficit which was widening due to exorbitant import payments compared to sluggish export earnings for the past few months.

The trade deficit widened 85.53 per cent to $3.10 billion in July compared to $1.67 billion in the same month last year.

The real effective exchange rate below 100 means the country’s exports remain competitive and import expensive. The situation reverses when REER stands above 100 on the index, it was learnt.

It improved by 39 basis points in July compared to 99.81 points in June, according to the data released by the State Bank of Pakistan’s (SBP).

The local currency ended up at Rs162.43 against the US dollar in the inter-bank market on July 30, 2021, according to the central bank.

It further depreciated by slightly over 1pc (or Rs1.75) to Rs164.14 to the greenback on Friday, the last working day, since end of July.