The Economic Advisory Council (EAC) has advised Prime Minister Shehbaz Sharif to take measures to maintain export competitiveness by easing pressure on the local exchange rate.
During the meeting, some EAC members raised concerns about the rupee’s overvaluation, citing the Real Effective Exchange Rate (REER) of 104.05 for January 2025, indicating that the rupee is overvalued by 4 percent. However, Foreign Minister Ishaq Dar disagreed, arguing that the rupee is actually undervalued by at least 15 percent.
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Exporters Raise Alarm Over Rupee’s Overvaluation
Exporters warned that the overvalued rupee was negatively impacting Pakistan’s export competitiveness. Meanwhile, data from the State Bank of Pakistan (SBP) showed that foreign exchange reserves had dropped by $1 billion, standing at $11 billion as of last week.
Easing Import Restrictions and Tax Relief Proposed
The meeting also focused on relaxing import restrictions to support key industries. The State Bank of Pakistan (SBP) confirmed that duty-free imports of cotton, textile machinery, and raw materials had been approved. Some EAC members proposed allowing raw sugar imports for refining and re-export, while others suggested removing sales tax on imported raw materials to boost industrial growth.
PM Shehbaz Directs Formulation of a Comprehensive Strategy
In response, Prime Minister Shehbaz Sharif instructed authorities to collaborate with the EAC to formulate a comprehensive strategy to address the challenges discussed in the meeting.
