Abdul Ghani

Pakistan’s inflation rose to 5.6 percent year-on-year in September 2025 from 3 percent a month earlier, mainly due to flood-induced increases in food prices and adjustments in energy tariffs.

According to the Finance Division’s Monthly Economic Update & Outlook (October 2025), the Consumer Price Index (CPI) for September showed moderate inflation, with annual inflation down from 6.9 percent in the same month last year. On a month-on-month basis, prices increased by 2 percent compared to a 0.6 percent decline in August.

During July–September FY2026, inflation averaged 4.2 percent compared to 9.2 percent in the corresponding period last year. “The inflation uptick largely reflected temporary food and energy price adjustments,” the report said.

Major contributors to the year-on-year CPI increase were education (10.7 percent), health (10.6 percent), clothing and footwear (8 percent), and non-perishable food items (6.5 percent). Smaller increases were recorded in restaurants and hotels (6.1 percent), transport (4.2 percent), and housing, water, electricity, and gas (3.7 percent).

Declines were observed in perishable food items (-3.7 percent) and recreation and culture (-2.7 percent). The Sensitive Price Indicator (SPI) for the week ending October 23 rose 0.22 percent, with 20 of 51 items increasing in price.

The Finance Division said inflationary pressures were milder than anticipated given the flood impact, as supply chains recovered faster and food availability improved. “The outlook suggests inflation will remain within the target range of 5–7 percent over the medium term,” it added.

Economists attributed the moderation to stable currency exchange rates, prudent monetary management, and declining global commodity prices. “The current trajectory shows inflation is being managed effectively without curbing growth,” one analyst said.

The report emphasized that inflation expectations of both consumers and businesses had eased in recent sentiment surveys, indicating confidence in price stability. Energy pricing adjustments, however, remain a short-term risk.

The Finance Division projected inflation between 5 and 6 percent in October, reflecting easing food prices and steady fuel costs. It said that continued fiscal discipline, steady remittances, and stable reserves would support price containment.

Credit: INP-WealthPk