Farooq Awan

Pakistan’s inflation surged to 5.6 percent in September 2025, up sharply from 3 percent in August, as record-breaking floods devastated crops, disrupted supply chains and pushed up food and transport costs, according to the Planning Ministry’s Preliminary Flood Damage Assessment Report.

The ministry attributed the spike to widespread destruction of agricultural output and infrastructure that tightened the supply of essential commodities. “Recent floods devastated crops, damaged infrastructure and disrupted supply chains, triggering an abrupt rise in food prices,” the report noted.

The floods destroyed large tracts of cotton, sugarcane, rice, maize, and vegetables—Pakistan’s major crops—causing food scarcity across several provinces. The agriculture sector, which contributes nearly one-fifth of GDP, has suffered estimated losses of Rs430 billion, with growth forecasts revised down to 3.0–3.8 percent from the 4.5 percent target for FY2026.

The resulting shortage of locally produced staples, combined with damaged road and storage networks, drove up transport costs and curtailed market access. “The floods have created both supply-side and logistical shocks,” the document said, warning that food inflation would remain elevated in coming months as new crops fail to reach markets on time. Pakistan’s external trade has also been hit hard.

Exports of rice, a key source of income that generated $3.35 billion last fiscal year, are projected to fall by $450 million in FY2026. Meanwhile, imports of raw cotton, wheat, and pulses are expected to rise to meet domestic shortfalls. The ministry cautioned that these pressures would likely widen the trade deficit and strain foreign exchange reserves.

Economists cited in the report warned that inflation could further accelerate if global commodity prices remain volatile. The report highlighted that the strong dollar and high international shipping costs continue to push import prices upward, compounding domestic disruptions. “Sowing of Rabi crops, including wheat, may be delayed due to the slow receding of floodwater in southern Punjab and Sindh,” it stated.

“This delay in sowing is likely to adversely affect production, putting additional pressure on food inflation.” The document suggested that Pakistan must enhance strategic grain reserves, stabilize input supply chains, and strengthen climate-resilient farming to curb future shocks. It also urged targeted subsidies and direct support to vulnerable families to cushion the short-term impact.

Analysts estimate that the inflationary surge could erode purchasing power, widen fiscal pressures, and slow the recovery of rural demand. The ministry underscored that inflation management must now be central to the post-flood recovery framework. “Without coordinated fiscal, monetary and supply-side measures, price volatility could jeopardise macroeconomic stability,” the report concluded.

Credit: INP-WealthPk