Pakistani Rupee is Overvalued: Economic Advisory Council

The Economic Advisory Council (EAC) has urged Prime Minister Shehbaz Sharif to maintain export competitiveness by helping ease the pressure on the local exchange rate. Some EAC members warned that the rupee was under pressure and pointed to the Real Effective Exchange Rate (REER) of January’s 104.05 which shows that the rupee is overvalued by 4 percent. Foreign Minister Ishaq Dar didn’t agree and claimed that the rupee was in fact undervalued by at least 15 percent. Exporters in the council warned that the rupee’s overvaluation was eroding export competitiveness, while the central bank’s data showed foreign exchange reserves had dropped by $1 billion to $11 billion as of last week. The meeting also discussed easing import restrictions. The central bank confirmed duty-free imports of cotton, textile machinery, and raw materials. Some EAC members suggested allowing raw sugar imports for refining and re-export, while others urged the government to remove sales tax on imported raw materials. The premier directed authorities to collaborate with the EAC to formulate a comprehensive strategy.