Pakistan's Food Inflation Risks Escalate Amid Regional War and Global Commodity Price Surge

The State Bank of Pakistan (SBP) has warned that food prices in the country may rise even higher than expected, potentially becoming a global issue. The central bank's biannual monetary policy report highlighted the impact of regional war on food prices, particularly in countries like Pakistan.

Higher oil prices have pushed up fertiliser costs, hurting the agricultural sector. With 46% of the population already facing hunger-like conditions, the SBP notes that elevated food prices may persist due to rising gas prices and the risk of El Niño during the first half of FY27.

Agriculture in Pakistan is struggling with outdated irrigation systems causing significant water losses, high input costs such as fertiliser, electricity, and expensive seeds, and unpredictable climate conditions. The sector's woes are further exacerbated by global commodity price inflation, which led to a 25% decline in food exports from Pakistan in FY26.

The report notes that the re-escalation of conflict in July resulted in increased energy prices, while prospects of a stronger El Niño this year may drive up fertiliser costs and subsequently impact agricultural commodity prices. With global growth outlook becoming more uncertain, the SBP warns that these developments have implications for inflation in both advanced economies and emerging markets.