By Farooq Awan

Pakistan's inflation accelerated to 11.1% year-on-year in August 2026, up from 9.2% in July, as rising food and transport costs intensified price pressures at the beginning of FY2026-27.

According to the Ministry of Planning, Development and Special Initiatives' Monthly Development Update – September 2026, available with Wealth Pakistan, average Consumer Price Index (CPI) inflation stood at 10.2% during July-August FY2026-27, compared with just 3.6% in the corresponding period of the previous fiscal year.

The two-month comparison represents a sharp increase of 6.6 percentage points from the corresponding period last year, indicating a significant return of price pressures after the much lower inflation recorded at the beginning of FY2025-26.

Food and transport emerged as the main drivers of the latest increase.

Urban food inflation reached 12.1% in August, while transport inflation climbed substantially higher to 20.2%, according to the report.

The August headline inflation rate was 1.9 percentage points higher than July's 9.2%, showing that price pressures strengthened within the first two months of the new fiscal year.

The Planning Ministry described the rise as renewed inflationary pressure and said the government had strengthened market oversight through the National Price Monitoring Committee (NPMC) and enhanced surveillance mechanisms aimed at containing price volatility.

Food prices received particular attention under the monitoring mechanism.

Two NPMC reviews were conducted in August, covering inflation, food quality and liquefied petroleum gas pricing. The government initiated measures to narrow wholesale-retail price gaps and address differences between notified and actual market prices of LPG.

The Ministry of Petroleum and the Oil and Gas Regulatory Authority were tasked with ensuring fair LPG pricing.

Food-quality monitoring also emerged as a significant issue during the reviews, with 176 of 491 packaged food samples failing quality tests. The findings prompted a nationwide survey of loose edible oil, ghee and milk, alongside directions for a national food-quality framework and enhanced quarterly testing, including in rural markets.

The inflation increase comes as several other indicators point to continued economic activity at the beginning of FY2026-27.

Large-scale manufacturing grew 3.03% year-on-year in July, with 13 of 22 sectors recording positive growth. Domestic cement sales increased 8% to 7.1 million tonnes during July-August, while imports of goods and services rose 11.1% to $14.008 billion.

Exports and remittances also strengthened. Total exports of goods and services increased 9.2% to $7.256 billion, while workers' remittances rose 14.7% to $7.287 billion during July-August.

The contrasting indicators leave policymakers balancing economic recovery against renewed price pressures.

The Planning Ministry said sustaining the recovery would require balancing price stability with continued export promotion, fiscal discipline and structural reforms to achieve durable and inclusive growth.

The latest data therefore show a mixed start to FY2026-27: economic activity and external inflows have remained resilient, but average inflation has risen from 3.6% to 10.2% year-on-year, with the August rate reaching 11.1% as food and transport costs exert greater pressure on consumers.

Credit: INP-WealthPk