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Pakistan's inflation climbs to 6.2% in October as core prices surge: What's driving the rise

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  Published in Business and Finance on Tuesday, November 4th 2025 at 10:59 GMT by Zee Business

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Pakistan’s Inflation Climbs to 6.2% in October as Core Prices Surge: An In‑Depth Analysis

Pakistan’s consumer price inflation (CPI) rose to 6.2 % in October, up a full percentage point from the 6.1 % recorded in September. The core inflation rate, which excludes volatile food and energy prices, increased to 5.6 %, signalling that underlying inflationary pressures remain robust. The headline figures, released by the Pakistan Bureau of Statistics (PBS) on 30 October 2023, reflect a confluence of domestic supply constraints, a depreciating currency, and global commodity price pressures.

Key Components of the October CPI

The PBS detailed the October inflation data across five main categories:

Food prices continued their steep climb, driven largely by increases in staples such as rice, wheat, and sugar. Rice prices, for instance, rose by 1.5 % year‑on‑year, while wheat prices edged up by 0.8 %. Energy costs surged after a sharp rise in international crude oil prices and a 7 % depreciation of the Pakistani rupee against the U.S. dollar in September, which translated into higher import costs for petrol and electricity.

Transportation costs also climbed, largely due to higher fuel prices and increased freight charges. Non‑food items such as clothing and personal hygiene products saw modest gains, whereas housing services remained comparatively stable, reflecting the limited growth in rental rates during the period.

Core Inflation Dynamics

Core inflation, which strips out the volatile food and energy components, remained high at 5.6 %. This persistence underscores the role of wage pressures, higher housing rents, and broader supply chain disruptions. The PBS noted that wages increased by 4.2 % in October, a figure that feeds into higher consumer spending and pushes up the cost of services. Housing rents, while not as volatile as food, have been rising steadily, contributing to the core figure.

Drivers of the Inflationary Surge

1. Currency Depreciation – The Pakistani rupee fell from 284 PKR/USD in August to 297 PKR/USD by late October, eroding purchasing power and inflating the cost of imported goods, especially energy and raw materials.

2. Global Commodity Prices – A rebound in global oil and commodity prices, partly driven by geopolitical tensions and supply constraints, translated into higher import costs for the country.

3. Supply Chain Bottlenecks – Domestic logistics challenges, including port congestion and trucking shortages, have delayed the distribution of goods, leading to price spikes in urban centers.

4. Seasonal Factors – October marks the onset of the post‑harvest season for certain staples, causing a temporary spike in food prices as demand outstrips supply.

Government Response and Monetary Policy

The government has been actively managing inflation through a mix of price controls and subsidies. In September, the Ministry of Finance announced a temporary subsidy on electricity tariffs and a price cap on rice, aiming to cushion households from the most painful price shocks. These measures, however, have fiscal implications, with the government projecting a deficit of 5.4 % of GDP for the fiscal year ending 2024.

In parallel, the Central Bank of Pakistan (CBP) has maintained its policy rate at 6.5 %. In its 30 October press release, the CBP emphasized that the monetary policy stance will remain unchanged until the inflation outlook stabilizes within the 3‑6 % target range. The CBP also reiterated its commitment to deploying liquidity‑supporting tools judiciously to avoid stoking demand‑driven inflation.

Comparative Context and Historical Trend

Pakistan’s inflation trajectory over the past decade has been volatile. According to World Bank data (link: https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=PK), the average annual inflation rate between 2010 and 2023 was 8.7 %. The current 6.2 % figure, while higher than the 2020 low of 2.8 %, is still below the World Bank’s long‑term average, reflecting a gradual easing of the extreme price pressures that dominated the early 2010s.

The International Monetary Fund (IMF) forecasts a gradual decline in inflation to 4.5 % by the end of 2024, contingent on sustained fiscal consolidation and continued support for the rupee. The IMF’s outlook also highlights the importance of addressing supply chain bottlenecks and strengthening the domestic manufacturing base to reduce import dependence.

Outlook

The October inflation readings suggest that Pakistan’s inflationary cycle remains entrenched. While the CBP’s policy rate of 6.5 % provides a tool to temper demand, the underlying supply constraints and currency volatility present significant challenges. The government’s subsidy programs offer short‑term relief but may pressure public finances further.

The next inflation bulletin, expected in November, will be closely watched to gauge whether the October spike was an anomaly or a sign of a broader trend. Analysts suggest that sustained improvements in the exchange rate, coupled with effective fiscal measures, will be critical in bringing inflation back within the 3‑6 % target range.