PBS Data Shows Accelerating Price Pressures Despite Official Forecasts
ISLAMABAD: Annual consumer inflation in Pakistan accelerated to 4.1% year-on-year in July, up from 3.2% in June, according to new data released by the Pakistan Bureau of Statistics (PBS) on Friday. The rise in inflation was largely driven by increasing prices of food items, petroleum products, and essential medicines.
On a month-on-month basis, consumer inflation rose by 2.9% in July, marking a significant jump from recent months. The increase aligns with recent warnings from the State Bank of Pakistan (SBP) about renewed inflationary pressures, particularly due to unexpected hikes in energy and fuel prices.
Earlier this week, the finance ministry had forecasted inflation for July to remain within a range of 3.5% to 4.5%, citing stable supply chains and easing price pressures following a steep drop in inflation during the previous fiscal year. However, the latest figures indicate that inflationary momentum is gaining strength again.
Fuel and Food Costs Lead to Broad-Based Price Increases
The inflation uptick comes as the government continues to adjust fuel prices upward, contributing to a cascading effect on transportation and food distribution costs. The Sensitive Price Index (SPI), which tracks weekly changes in essential goods, reported a 4.07% increase in the week ending July 24 — the sharpest weekly jump in recent memory. Rising petroleum prices directly impacted transport fares, which in turn drove up the cost of perishable goods like vegetables.
The SBP, in its monetary policy announcement this week, kept the benchmark interest rate unchanged at 11%, citing an increasingly uncertain inflation outlook. The central bank’s monetary policy committee noted that recent hikes in gas tariffs and fuel prices had exceeded earlier projections and emphasized the need to maintain a positive real interest rate to meet the 5–7% inflation target.
Pakistan’s economic policy remains under the watchful eye of the International Monetary Fund (IMF), with the country currently implementing fiscal reforms as part of a $7 billion loan programme. As part of this agreement, the government passed a contractionary budget in June, cutting public spending in an effort to rein in the fiscal deficit and stabilize macroeconomic conditions.
Despite these measures, the July inflation figures point to persistent cost pressures, raising concerns about the effectiveness of current policy tools and the likelihood of meeting the inflation target in the near term.
