Pakistan's Artificial Currency Appreciation Hurts Exports and Investments

The Pakistani rupee has appreciated against the US dollar over the past year and a half, causing significant concern for exporters. The currency has gained at least Rs4 against the greenback during this period, with some analysts pointing out that the Real Effective Exchange Rate (REER) has risen to 106.4.

Exporters claim that the artificial exchange rate is discouraging them from competing in the international market, where production costs are already higher than in China by 12%. Javed Bilwani, a former president of the Karachi Chamber of Commerce and Industry, suggested that gradual depreciation of the rupee could help make Pakistani goods more competitive.

The strong rupee has led to an increase in imports, with Pakistan importing cars in bulk for the first time. This has resulted in a huge trade deficit of $39 billion, offsetting remittance inflows of $41.5bn. Financial experts have noted that foreign investors are being discouraged by the policy, leading to declining investment each year.