Pakistan currency hit 21-month low at the international matrix of real effective exchange rate (REER) index, depreciating 1.22% to 96.61 points in June 2025, compared to the prior month of May, according to the central bank’s data published on Friday.
The State Bank of Pakistan (SBP) reported the REER index had stood at 97.79 points in May.
The June level was last seen in September 2023.
The month-on-month (MoM) deprecation in the inflation adjusted currency index suggests Pakistan’s exports became relatively competitive, while its imports got expensive – helping the nation to better manage its twin trade and current account balances.
Pakistan rupee closed at Rs284.87 against US dollar on Friday compared to Rs284.97/$ on Thursday – exhibiting an appreciation of 0.04% on a day-to-day basis.
It closed at Rs283.76/$ on June 30 compared to Rs282.02/$ on May 30, 2025 – showing a cumulative drop of 0.61% in the one-month.
The MoM depreciation has reflected in the REER index values.
AKD Securities’ Director Research Muhammad Awais Ashraf said the near two-year low in the REER index should improve global investors’ confidence in Pakistan’s economy, enhancing foreign investment in different sectors of the domestic economy and in stock and debt markets.
A gradual depreciation in the domestic currency against the US dollar and in the REER index both suggest the rupee would not drop abruptly, suggesting it would remain stable.
He recalled the local currency has largely remained stable for about one-and-half to two years now, paving way for the economy to enter a growth phase after achieving stability in the past two years.
“[This helped] Foreign Direct Investment (FDI) inflows hitting five-year high at $2.5 billion in the fiscal year ended June 30, 2025,” he said.
The development should also help attract fresh foreign inflows at Pakistan Stock Exchange (PSX) and in rupee-denominated local debt instruments like T-bills and Pakistan Investment Bonds (PIBs), he anticipated.
He said the REER index dropped to the current level in the wake of gradual depreciation in rupee in and in US dollar at global level as well in the past 12-month. Besides, slowing inflation reading in Pakistan and in the US helped shape REER supportive towards the domestic economy.
He projected his research house had taken the view that the local currency would depreciate by 4% to Rs295/$ in the just started new fiscal year 2025-26. This would partly help bring the REER index down to around 94 points in the year.
Ismail Iqbal Securities (IIS), Head of Research, Saad Hanif said the return of stability in the economy, and particularly in rupee-dollar exchange rate and REER index, has encouraged economic managers to make an attempt for higher growth of 4.2% in gross domestic product (GDP) in FY26.
Pakistan’s REER index clocks in at 99.42 in April 2025
“Making an attempt for higher growth may pop up old challenges like return of deficit in the balance of current account, as the targeted growth – even to be led by increase in exports – may not be possible without a surge in imports,” he said, adding Pakistan’s economy heavily depends on imports.
Experts say REER index at 100 points is considered at an ideal position. It is considered to be near its fair value while moving in the range of 95-105 points. It stands supportive below 100 points for emerging economies like Pakistan which lack foreign exchange and are highly dependent on imports.
Earlier, SBP has mostly maintained the REER index near and around 95-96 points to attract foreign currency inflows in near past years.
