Pakistan Inflation Soars to 11-Month High Amid Devastating Floods

Islamabad: Pakistan’s consumer price index (CPI) is projected to surge to 6.5-7.0% year-over-year in September 2025, a sharp increase from 3.0% in August 2025 and marking the highest level in eleven months. This alarming rise is primarily attributed to flood-induced disruptions in food supplies, pushing food prices significantly higher.

The anticipated 3.1% month-over-month inflation for September 2025 represents the highest monthly increase in 26 months. This substantial jump is largely driven by an expected 8.75% surge in the food segment, potentially the highest month-over-month increase ever recorded.

Major contributors to this monthly inflation spike include staggering price hikes in essential food items: tomatoes (+122%), wheat (+49%), wheat flour (+39%), and onions (+35%). Other staples like potatoes, rice, chicken, eggs, and sugar also saw notable price increases of 5.4%, 4.3%, 4.1%, 3.5%, and 2.7%, respectively. However, fruit prices are expected to remain relatively stable, while vegetable prices could experience a decline of approximately 10% month-over-month.

Offsetting these increases, the housing, water, electricity, and gas category is predicted to fall by 0.24% month-over-month in September, thanks to a 2.19% decrease in electricity charges. This drop stems from the Quarterly Tariff Adjustment (QTA) of Rs-1.8881/kWh for August-October and the Fuel Charges Adjustment (FCA) of Rs-1.7856/kWh, compared to Rs-0.7772/kWh in August 2025. A 2.75% increase in Liquefied Petroleum Gas (LPG) prices partially counteracted the electricity price reduction.

The transport sector is also expected to see a 1.25% month-over-month decline due to a 2.7% drop in motor fuel prices. This decrease is attributed to stable petrol prices and a 5.3% decrease in high-speed diesel (HSD) prices.

With inflation predicted at 6.5-7.0% for September 2025, real interest rates are expected to reach 400-450 basis points, significantly exceeding Pakistan’s historical average of 200-300 basis points. Major risks to the inflation outlook include potential fluctuations in global commodity prices.