By Farooq Awan

The government expects Pakistan’s inflation to remain in the 10–11% range in August 2026, after consumer price inflation (CPI) eased to 9.2% in July from 11.1% a month earlier, with international commodity and energy prices remaining a key risk to the domestic price outlook.

According to the Finance Division’s Monthly Economic Update & Outlook – August 2026, available with Wealth Pakistan, inflationary pressures are expected to persist in the near term, with August CPI inflation projected at 10–11%.

The forecast follows a moderation in headline inflation in July. Consumer Price Index inflation stood at 9.2% year-on-year in July 2026, down from 11.1% in June, although substantially higher than the 4.1% recorded in July 2025.

On a month-on-month basis, consumer prices increased 1.2% in July, compared with a decline of 0.3% in the preceding month.

Price pressures varied considerably across expenditure groups. Transport recorded year-on-year inflation of 15.1%, while communication prices increased 13.6% and non-perishable food items 11.6%.

Inflation in clothing and footwear stood at 9.2%, followed by education at 9%, health at 7.8%, housing, water, electricity, gas and other fuels at 7.1%, and furnishings and household equipment at 6.9%.

Restaurants and hotels recorded inflation of 5.7%, while prices of perishable food items increased 5.2%. Tobacco inflation stood at 3.2% and recreation and culture at 1.3%.

More recent weekly price data showed relatively limited movement toward the end of August. The Sensitive Price Indicator increased 0.05% during the week ending August 27.

Of the 51 essential items covered by the weekly index, prices of 20 items increased, 11 declined and 20 remained unchanged.

The Finance Division said the economy entered FY2027 with stronger macroeconomic fundamentals, but cautioned that geopolitical uncertainty and movements in global energy prices remained important risks to the inflation outlook.

Global commodity developments continue to present a mixed picture. The FAO Food Price Index reached 131.1 points in July, up 0.7% from June and 1% from a year earlier, although it remained 18.2% below its March 2022 peak.

Meanwhile, the global energy price index declined 1.1% during the month, with coal prices falling 4.8% and crude oil prices decreasing 2.2%. The report, however, warned that renewed hostilities and maritime disruptions could threaten oil supplies.

The Finance Division said maintaining prudent macroeconomic management and advancing structural reforms would remain important for safeguarding stability and strengthening the economy’s resilience to external shocks.

Credit: INP-WealthPk