REER index declined to 103.3 in January 2026,down from 103.6 in December 2025

Pakistan’s Real Effective Exchange Rate (REER) index declined to 103.3 in January 2026, down from 103.6 in December 2025, according to the State Bank of Pakistan (SBP). The 0.3-point month-on-month dip reflects a marginal real depreciation of the rupee against a basket of trading partner currencies.

While the movement is modest, it carries signaling value. The REER, benchmarked to 2010=100, adjusts the nominal exchange rate for inflation differentials between Pakistan and its trading partners. A reading above 100 indicates that the rupee is relatively strong in real terms compared to the base year. At 103.3, the currency remains somewhat elevated, suggesting that domestic goods are still relatively more expensive compared to competitors when inflation is taken into account.

The slight easing in January could provide limited support to export competitiveness, particularly at a time when the external sector remains under scrutiny. A lower REER generally makes exports more price-competitive and discourages imports by raising their relative cost. However, the current adjustment is too small on its own to materially shift trade dynamics.