Pakistan rupee weakness fails to solve export drag

Pakistan’s export debate turned back to the rupee after State Bank research showed currency weakness offers only a limited boost when imported inputs and high energy costs absorb much of the price advantage. Research cited in the policy discussion put export responsiveness to the nominal effective exchange rate below one, with a 1% appreciation reducing export demand by about 0.56%.

The constraint is material for Pakistan’s goods trade because roughly 37% of export value is imported. Textiles, described as about 55% to 60% of exports, are especially exposed to imported raw materials and capital goods, meaning a weaker rupee can raise production costs almost as quickly as it lowers dollar prices.

Pakistan input costs blunt rupee gains

Data showed industrial power tariffs of roughly 13.5 cents to 15 cents per unit in Pakistan, above cited levels in India, Bangladesh, Vietnam and Malaysia. For export manufacturers, that gap can offset any currency gain by lifting the cost base before a shipment reaches foreign buyers.

The fx implication is that devaluation alone may worsen inflation and external financing pressure if it lifts import costs faster than export volumes. A cheaper rupee can also raise the local-currency burden of dollar debt and squeeze real wages in an economy dependent on imported food and energy.

Recent real exchange-rate data also complicates the case. Between May 2023 and December 2025, the real effective exchange rate was cited as appreciating about 19% despite nominal rupee weakness, with real appreciation against China above 20%.

Through July 2026, the test for policymakers is whether currency adjustment is paired with lower industrial energy costs, smoother customs processing and input-duty relief; without those changes, the rupee may keep bearing blame for a competitiveness problem rooted elsewhere.