Pakistan’s Inflation to Rise Further Next Year

While average inflation rose to 7.1 percent from 4.5 percent a year earlier, according to a World Bank report, pakistan's economy grew by 3.7 percent in fiscal year 2025-26.

Key points

• Average headline inflation stood at around 5.5 percent between July 2025 and February 2026 before accelerating to an average of 10.2 percent from March to June.
• While inflation is projected to rise to 8.2 percent, the World Bank expects Pakistan's economy to grow by 3.8 percent in FY27.
• While foreign exchange reserves reached $19.7 billion, pakistan issued Eurobonds worth $750 million and raised $3 billion in international markets.
• The growth pushed urban energy inflation from 11.7 percent in February to 26.8 percent in June.
• According to the report, the State Bank of Pakistan raised its policy rate to 11.5 percent against the backdrop of changing inflation conditions.

Meanwhile, the figures highlight continued economic expansion alongside renewed rate pressures driven by higher energy and food costs.

While inflation is projected to rise to 8.2 percent, the World Bank expects Pakistan's economy to grow by 3.8 percent in FY27. The outlook points to the challenge of sustaining economic expansion while managing renewed inflationary pressure in the current fiscal year.

While agriculture grew by 2.9 percent, backed in part by livestock, the services sector expanded by 4.1 percent. According to The report additionally, international rating agencies S&P and Moody's upgraded Pakistan's credit ratings.

While foreign exchange reserves reached $19.7 billion, pakistan issued Eurobonds worth $750 million and raised $3 billion in international markets. The fiscal deficit narrowed to 2.6 percent of gross domestic product. Pakistan Could Obtain New $50 Million Startup Fund. Inflation Accelerates as Energy Costs Rise.

Inflationary pressures intensified in the second half of FY26, driven by rising global energy rates after the conflict in the Middle East, higher wheat and perishable food rates, and the pass-through of fuel costs.

Average headline inflation stood at around 5.5 percent between July 2025 and February 2026 before accelerating to an average of 10.2 percent from March to June. It peaked at 11.7 percent in May 2026.

Food rates additionally rose after earlier moderation after flood related disruptions. Average food inflation reached 4.3 percent in urban areas and 5.4 percent in rural areas during the fiscal year. Almost Half of Region's Poorest Residents Live in Pakistan: World Bank.

Energy rates climbed sharply between February and June 2026. Petrol rates rose by approximately 36 percent, high speed diesel by 31 percent and liquefied petroleum gas by 46 percent. Transport fares rose by around 30 percent over the same period.

Meanwhile, the growth pushed urban energy inflation from 11.7 percent in February to 26.8 percent in June. Rural energy inflation rose from 5.7 percent to 27.6 percent. Core inflation, which excludes food and energy, averaged 7.4 percent in urban areas and 8.5 percent in rural areas during FY26. Urban core inflation reached 9 percent in May as higher transport costs spread to other rates.

According to the report, the State Bank of Pakistan raised its policy rate to 11.5 percent against the backdrop of changing inflation conditions. Stay Connected with ProPakistani.

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Taken together, the developments around pakistan's Inflation to Rise Further Next Year point to a situation that is still moving, and the coming days should bring more clarity.