KARACHI: Pakistan’s Real Effective Exchange Rate (REER) Index depreciated to 86.45 in February 2023 as compared to 93.96 in January 2023.

The State Bank of Pakistan (SBP) on Tuesday also reported that the Nominal Effective Exchange Rate (NEER) Index also declined to 39.29 in February 2023 down from 44.46 in January 2023. The NEER is an index of the bilateral nominal exchange rates of one country relative to its major trading partners or select basket of currencies. 

According to the SBP explanatory note on the topic posted on the website, the REER is an index of the price of a basket of goods in one country relative to the price of the same basket in that country’s major trading partners. The prices of these baskets expressed in the same currency using the nominal exchange rate with each trading partner. The price of each trading partner’s basket is weighted by its share in imports, exports, or total foreign trade.

The SBP has been (compiling and) publishing data on the NEER and the REER indices (base: 2010=100) through the website on monthly basis regularly. The indices are computed against the basket of countries constituting our major trading partners/competitors using weights as estimated by IMF periodically.

It is a dynamic concept as trading partners/competitors, and their respective weights, for different countries, can change overtime and Pakistan is no exception.