KEY POINTS
- NEER index climbs 0.90% month-on-month to 37.84 points
- REER also edges above 100, raising export competitiveness concerns
- Stronger rupee eases import costs but pressures exporters
- SBP clarifies index reflects trade-weighted currency movements
ISLAMABAD: Pakistan’s Nominal Effective Exchange Rate (NEER) strengthened in August 2025, registering a 0.90% month-on-month increase to a provisional value of 37.84 index points compared to 37.51 in July, according to the State Bank of Pakistan (SBP).
The development follows a marginal appreciation in the Real Effective Exchange Rate (REER), which rose to 100.10 index points from 100.01 in the same period, as per the latest data released by the central bank on Thursday. It indicated that the rupee has gained nominal strength, but also raised concerns over export competitiveness, it added.
NEER and REER comparison
| Period | NEER (Index points) | REER (Index points) | Change (MoM / YoY) |
| July 2025 | 37.51 | 100.01 | — |
| August 2025 | 37.84 | 100.10 | NEER ↑ 0.90% MoM / REER ↑ 0.09% MoM |
| August 2024 | 38.15 | 100.16 | NEER ↓ 0.81% YoY / REER ↓ 0.06% YoY |
Source: State Bank of Pakistan (SBP)
What the NEER movement means
The NEER index measures the value of the Pakistani rupee against a basket of currencies of major trading partners, weighted by trade shares. A rising NEER signals that the rupee is stronger in nominal terms, without accounting for inflation differences.
For ordinary citizens, this means imports — ranging from fuel and raw materials to consumer goods — become relatively cheaper. However, for exporters, it implies that Pakistani goods are more expensive in global markets, which could dampen external demand.
Economists note that such movements have direct implications for the trade balance. “A stronger NEER is positive for inflation control through cheaper imports, but it makes it harder for exporters to compete abroad,” a Karachi-based analyst explained to the media.
Explainer: Nominal vs. Real
Nominal terms (NEER): The raw exchange rate value against trading partner currencies, not adjusted for inflation. It reflects whether the rupee is stronger or weaker on paper.
Real terms (REER): The inflation-adjusted value, showing whether Pakistan’s goods are more or less competitive compared to trading partners.
Example: In August, the NEER rose to 37.84 (a stronger rupee), but REER at 100.10 means exports are slightly less competitive because local prices are increasing faster than in partner countries.
REER context and SBP guidance
The REER, which adjusts NEER for inflation differentials, stood at 100.10 in August, slightly above the neutral 100 index. According to SBP, a REER above 100 reflects reduced export competitiveness and cheaper imports. At the same time, the central bank stresses the figure should not be misinterpreted as an equilibrium value.
“Movement of the REER away from 100 simply reflects changes relative to its average value in 2010 and is unrelated to its equilibrium value,” the SBP noted in its explanatory guidance on the index.
Broader economic implications
The August NEER increase coincides with easing inflationary trends in Pakistan, where the imported items form a significant share of the consumption basket. A stronger rupee can help stabilise prices in the short term, though sustainability depends on global commodity prices, remittance inflows, and foreign debt servicing pressures.
On an annual basis, NEER declined by 0.81% from 38.15 in August 2024, highlighting ongoing volatility. REER also slipped slightly year-on-year, underscoring the impact of inflationary differentials.
Market observers caution that policymakers will need to balance exchange rate stability vis-à-vis export support measures to avoid widening of the trade deficit.
