Pakistan’s Inflation to Rise Further Next Year

Pakistan's economy expanded by 3.7 percent in the 2025-26 fiscal year, compared to 4.5 percent growth the previous year, according to a World Bank report. Inflation surged to 7.1 percent from 4.5 percent a year earlier, highlighting the impact of rising energy and food costs. The World Bank predicts another 3.8 percent growth in FY27, with inflation expected to climb to 8.2 percent.

Services grew by 4.1 percent, and agriculture by 2.9 percent, aided by livestock. Pakistan's credit ratings were upgraded by international agencies S&P and Moody's, and the country raised $3 billion through Eurobond issuances and foreign investments. The fiscal deficit declined to 2.6 percent of GDP. Inflation accelerated in the second half of FY26 due to higher global energy prices, wheat, and perishable food costs following Middle East conflicts.

Average headline inflation jumped from 5.5 percent to 10.2 percent between March and June 2026, peaking at 11.7 percent in May. Food prices rose after initial moderation due to flood disruptions, with urban food inflation hitting 4.3 percent and rural food inflation reaching 5.4 percent. Energy prices surged, with petrol increasing by 36 percent, high-speed diesel by 31 percent, and liquefied petroleum gas by 46 percent.

The State Bank of Pakistan raised its policy rate to 11.5 percent to address the evolving inflation landscape.