Pakistan Exporters Say Strong Rupee Is Hurting Trade Competitiveness

Pakistani exporters have renewed criticism of the country's exchange-rate management, arguing that a relatively strong rupee is reducing their competitiveness and discouraging investment in export industries. The debate pits the immediate benefits of currency stability against the longer-term need to sell more goods and services abroad.

Export representatives said the rupee appreciated by at least four rupees against the US dollar over roughly 18 months while currencies in India and Bangladesh weakened. Their argument is that this difference makes Pakistani products more expensive in foreign-currency terms unless businesses reduce margins or cut costs elsewhere.

Exporters connect currency value to trade pressure

Pakistan recorded a trade deficit of about $39 billion in the 2025-26 financial year, while workers' remittances reached approximately $41.5 billion. Exporters say relying on remittances to offset a large goods deficit does not resolve the structural weakness in trade.

They also point to the real effective exchange rate, or REER, which some analysts placed around 106.4. A value above 100 is often interpreted as suggesting the currency is stronger than the level implied by the base period, although the indicator is not a simple instruction to devalue. It reflects inflation and trade relationships with multiple partners and can change as those inputs change.

Business leader Javed Bilwani said production costs in Pakistan were around 12 percent higher than in China. Energy, taxation, financing, logistics and regulatory delays can all influence that gap. Currency policy is therefore only one part of export competitiveness, but it can magnify other disadvantages.

The case for a stable rupee

Government and central-bank officials have emphasized the stability delivered by a stronger currency. Pakistan imports fuel, machinery, industrial inputs and consumer goods, so a weaker rupee can quickly raise domestic prices and the cost of production.

Currency stability can also improve planning for businesses with foreign debts or imported components. It may reduce inflation expectations and make external obligations easier to manage in rupee terms. Those benefits explain why policymakers are cautious about calls for depreciation.

The policy question is whether the exchange rate is genuinely determined by market supply and demand or held at a level that cannot be sustained. An artificially cheap currency can fuel inflation and increase debt costs; an artificially expensive one can encourage imports and undermine exports. Neither extreme offers a durable solution.

Foreign investment needs more than exchange-rate movement

Exporters argue that investors are less likely to build factories for overseas markets when they expect local costs to rise faster than the currencies in which revenue is earned. Yet investors also consider political stability, tax rules, contract enforcement, energy reliability and the ability to repatriate profits.

A change in the Pakistan exchange rate cannot compensate for weaknesses in those areas. It can improve price competitiveness, but unpredictable swings may create a different deterrent. A transparent, flexible framework is more useful than a one-time adjustment whose direction businesses cannot anticipate.

What policymakers should measure

The exchange-rate debate should be tested against export volumes, value-added production, import composition, reserves and inflation rather than a single dollar rate. A surge in vehicle or luxury imports may support the exporters' warning, while cheaper machinery imports could expand productive capacity.

Authorities should also explain the degree of intervention and publish data that allow markets to judge whether stability is supported by reserves and external inflows. Export industries, meanwhile, need to demonstrate how currency changes would translate into higher orders, jobs and investment rather than only wider margins.

Pakistan's challenge is to avoid choosing between stability and competitiveness as if only one can exist. The stronger approach combines a market-responsive rupee with lower energy and logistics costs, predictable taxes and support for firms that move into higher-value exports. The exporters' warning deserves attention, but the answer must address the full cost structure behind the country's persistent trade deficit.