Rupee Now Even More Overvalued

Pakistan's rupee maintained its overvalued status against the currencies of its major trading partners in July 2026, according to the latest State Bank of Pakistan data. The Real Effective Exchange Rate (REER) for the Pakistani currency rose to 107.92, remaining at an 8-year high. The REER increased by 1.49 percent month over month, from 106.33 in June 2026 to 107.92 in July.

The index had been on a rising trend, reaching 107.92 from 103.11 in February 2026. An REER value above 100 suggests that the domestic currency is relatively stronger compared to its trading partners when accounting for inflation. While a stronger rupee may make imports cheaper, it could also lower the competitiveness of Pakistani exports.

An overvalued rupee makes Pakistani goods more expensive for foreign buyers, potentially hindering exporters' ability to compete on price in international markets. Simultaneously, imports become relatively cheaper for domestic consumers. The REER has shown a steady upward trend from 103.11 in February to 107.92 in July. While a persistently high REER can put pressure on export competitiveness, export performance is also influenced by factors such as global demand, productivity, production costs, and trade policies.