Pakistan’s exporters have raised concerns over the country’s managed exchange rate policy, arguing that an artificially strong rupee is reducing export competitiveness, discouraging foreign investment, and contributing to a widening trade deficit.
According to a report, industry representatives said the rupee has appreciated by around Rs. 4 against the US dollar over the past 18 months, while regional currencies such as those of India and Bangladesh have weakened. They believe the stronger rupee has made Pakistani goods more expensive in international markets while making imports relatively cheaper.
The concerns come after Pakistan’s trade deficit widened to $39 billion in FY2025-26, despite workers’ remittances reaching a record $41.5 billion. Exporters said the increase in imports, including a surge in vehicle imports, has offset the positive impact of higher remittance inflows.
Javed Bilwani, exporter and former president of the Karachi Chamber of Commerce and Industry (KCCI), said manufacturing costs in Pakistan are about 12% higher than in China, making it difficult for local industries to compete globally. He argued that a gradual depreciation of the rupee would improve export competitiveness and encourage businesses to expand production and investment.
Some analysts also highlighted Pakistan’s Real Effective Exchange Rate (REER), which has climbed to 106.4. They noted that a REER above 100 generally indicates an overvalued currency, which could reduce export competitiveness and discourage investment in export-oriented industries.
Exporter Amir Aziz said the exchange rate policy, combined with the State Bank of Pakistan’s policy rate of 11.5%, has increased production costs and put additional pressure on manufacturers. He also claimed that under-invoicing and cross-border smuggling continue to negatively affect domestic industries.
Although exporters have benefited from government incentives, including subsidized financing, industry representatives said these measures have offered only limited relief as the manufacturing sector remains under pressure.
They also questioned how Pakistan plans to increase exports to $60 billion and double trade with the United States to $20 billion over the next five years without stronger support for the manufacturing sector.
