Pakistan’s Real Effective Exchange Rate (REER), which measures the value of the rupee against a weighted basket of foreign currencies, decreased to 103.73 in December 2025 from 104.88 (revised) in November 2025, according to the latest data released by the State Bank of Pakistan (SBP).
A REER above 100 indicates that the domestic currency is relatively overvalued, making exports less competitive while imports become cheaper. Conversely, a value below 100 suggests an undervalued currency. On a month-on-month basis, Pakistan’s REER fell by nearly 1.09% in December 2025. Compared to December 2024, the REER increased slightly by 0.06%, standing at 103.67.
Topline Securities noted that the current REER is above the last 10-year average of 103.0, implying the home currency is somewhat overvalued relative to peer countries.
The SBP clarified that a REER of 100 should not be interpreted as an equilibrium level. Movements above or below 100 reflect relative changes compared to the 2010 average and are not indicative of the currency’s fundamental value.
Meanwhile, the Nominal Effective Exchange Rate Index (NEER), which measures the rupee’s value without accounting for price differences, declined by 0.54% month-on-month to 37.97 in December 2025 from 38.18 in November. Year-on-year, the NEER fell 3% from 39.15 in December 2024.
The SBP defines REER as an index of the price of a basket of goods in one country relative to the price of the same basket in its major trading partners. Prices are converted into the domestic currency using the nominal exchange rate and weighted according to each partner’s share in trade.
This decline in REER may improve Pakistan’s trade balance over time by making exports relatively more competitive and imports slightly more expensive, though the currency remains above its historical average.
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