Pakistan’s REER climbs to 7.5-Year high of 105.17 in March, signaling pressure on export competitiveness

Pakistan’s currency competitiveness weakened further in March 2026 as the country’s Real Effective Exchange Rate (REER) rose to its highest level in more than seven years, according to data released by the State Bank of Pakistan.

The REER index climbed to 105.17 in March 2026, marking a 7.5-year high, compared with 103.11 in February 2026, reflecting a 1.99% month-on-month increase.

On a yearly basis, the index also recorded an upward trend, rising 3.5% from 101.55 in March 2025, indicating a sustained appreciation in the rupee’s real value against the currencies of Pakistan’s major trading partners.

The latest reading pushed the index beyond levels last seen in September 2018, when the REER stood at 106.63, underscoring renewed concerns about export competitiveness.

A REER reading above 100 typically signals that a country’s exports have become relatively more expensive in global markets, while imports become cheaper. Conversely, a reading below 100 indicates improved export competitiveness.

In an explanatory note, the central bank clarified that a REER value of 100 should not be interpreted as the equilibrium level of the currency. Instead, movements away from 100 reflect deviations from the base-year average, which is anchored to 2010 price levels, rather than a definitive assessment of currency misalignment.

Brokerage house Topline Securities noted that the latest REER reading is also higher than the 10-year average of 102.77, reinforcing the view that the rupee remains relatively overvalued in real terms.

The firm projected that the PKR/USD exchange rate could close in the range of Rs280–282 by June 2026, suggesting expectations of gradual currency adjustment in the coming months.

Meanwhile, the Nominal Effective Exchange Rate (NEER) index also moved higher on a monthly basis. The NEER rose 1.02% month-on-month to a provisional value of 38.02 in March 2026, up from 37.64 in February 2026.

However, on an annual basis, the NEER declined 1.3% from 38.53 in March 2025, indicating some depreciation in nominal terms over the past year.

According to the central bank, REER measures the relative price of a standardized basket of goods in one country compared with the price of the same basket in its major trading partners, after adjusting for exchange rates and trade weights.