REER index falls below 100 in April

KARACHI: Pakistan’s real effective exchange rate (REER) depreciated to 99.4 in April, down from 101.6 in the previous month, according to data released by the central bank on Friday.

REER indicates the competitiveness of the local currency against its trading partners. A reading below 100 is beneficial for countries like Pakistan, which typically run a current account deficit, as it supports exports. Conversely, REER levels above 100 make imports cheaper, which can put pressure on the country’s foreign exchange reserves.

On Friday, the rupee experienced a slight depreciation against the dollar in the interbank market, closing at 281.66 per dollar compared with the previous close of 281.61.

In the open market, the rupee remained stable, trading at 282.75 to the dollar.Dealers noted that the local currency lost some ground as demand for dollars from importers surpassed dollar sales from exporters.

On Wednesday, Pakistan received the second tranche of $1.02 billion from the International Monetary Fund (IMF) under a $7 billion loan programme, which has further bolstered foreign exchange reserves and reinforced macroeconomic stability.

As of May 9, the State Bank of Pakistan’s foreign exchange reserves increased by $71 million to $10.4 billion. According to the SBP, the IMF loan disbursement will be reflected in its reserves for the week ending May 16.