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

Pakistan’s inflation rate increased for the second consecutive month in October, reaching 6.2 per cent year-on-year, as prices climbed sharply across non-food and food categories. The Pakistan Bureau of Statistics (PBS) said the rise reflected mounting cost pressures in core inflation, signalling that price stability remains a major challenge for the government.

The increase comes amid supply disruptions triggered by recent floods and the temporary closure of the Pakistan–Afghanistan border, according to reports in foreign media. Economists and government officials say these factors, combined with ongoing fiscal strain, have contributed to renewed inflationary pressures that could persist through the coming months.

Core inflation continues to climb

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PBS data showed that inflation in urban areas rose 6 per cent compared with a year earlier, while rural inflation was higher at 6.6 per cent. Core inflation which excludes volatile food and energy prices and is considered a key indicator of long-term trends also saw a notable rise.

In urban regions, core inflation climbed to 7.5 per cent in October from 7 per cent a month earlier, while in rural areas it increased to 8.4 per cent from 7.8 per cent. Analysts said these figures underline persistent price pressures that could slow down consumer spending and weigh on the country’s fragile economic recovery.

The World Bank recently revised Pakistan’s inflation projection for the current fiscal year to 7.2 per cent, slightly above the government’s official target.

Despite the renewed inflationary trend, the State Bank of Pakistan (SBP) kept its benchmark interest rate unchanged at 11 per cent – significantly higher than the headline inflation rate. The central bank said inflation was likely to rise temporarily due to flood-related shocks before easing later in the fiscal year.

Finance Minister Muhammad Aurangzeb said the monetary policy stance was “moving in the right direction” and expressed optimism that borrowing costs could be reduced once inflation stabilises. However, business groups have called for immediate rate cuts, arguing that high interest rates are constraining investment and job creation.

Foreign media reported that the government has allocated around PKR 8.2 trillion for interest payments this year. Finance Secretary Imdad Ullah Bosal expects the actual figure to be lower, citing better debt management and reduced financing costs.

Food prices also rose sharply, particularly in rural regions. Urban food inflation stood at 4.5 per cent, while rural food inflation was higher at 6.8 per cent. Non-perishable food items, which account for nearly one-third of the inflation basket, increased 6.2 per cent on average, while perishable goods rose 1.7 per cent.

Tomato prices spiked 127 per cent, driven by border disruptions and supply shortages. Sugar prices increased 35 per cent, while wheat and flour also became more expensive. In contrast, prices of onions and chicken saw steep declines, providing some relief to consumers.

Energy prices presented a mixed picture. Gas tariffs rose 23 per cent year-on-year, but electricity rates fell 16 per cent due to government reforms in the power sector. Power Minister Sardar Awais Leghari said the reduction in electricity tariffs – down by PKR 10.3 per unit from last year – was made possible through renegotiated energy contracts and improved generation efficiency.

The adjustment has provided limited relief to households, though experts warn that overall living costs remain high due to rising food and transport expenses.

The SBP has already cautioned that Pakistan may fall short of its 4.2 per cent economic growth target for the fiscal year. The combination of rising inflation, subdued demand, and elevated borrowing costs continues to dampen business sentiment and delay investment recovery.