Pakistan’s Real Effective Exchange Rate (REER) climbed to 105.17 in March 2026, up from 103.11 in February, reflecting a 2 percent month-on-month increase and the highest level since September 2018, according to market data based on State Bank of Pakistan figures and Arif Habib Limited Research.
REER is a broader measure of the rupee’s strength against a basket of currencies of major trading partners, adjusted for inflation differentials, and is widely used to assess currency competitiveness.
A reading of 100 is considered the neutral benchmark. Values above this level typically indicate that the currency is becoming relatively overvalued, potentially reducing export competitiveness while making imports cheaper.
At the latest level, the rupee’s inflation-adjusted value is estimated to be around 5 percent stronger than the benchmark, raising concerns for export-driven sectors such as textiles, leather, surgical goods, and IT-enabled services.
The index has remained above the 100 mark for several months, and the recent increase pushes it to its highest level in nearly seven and a half years. On a cumulative basis, REER has risen 7.28 percent in FY26 to date and 1.56 percent in calendar year 2026, indicating a sustained strengthening trend in the rupee’s relative value.
While a higher REER can help reduce imported inflation by lowering the cost of commodities such as oil, machinery, and food inputs, it may also create pressure on exports and external account stability if the trend persists over time.
