Pakistan’s Inflation Slowdown Fails to Lower Essential Goods Prices

Pakistan’s slowing inflation rate offers little comfort to consumers struggling with persistently high prices for everyday essentials. While the government may take solace in the statistical relief, the reality for many remains that prices are still far higher than they were two years ago. The disconnect arises from how inflation is measured: it tracks the rate of price changes rather than the actual price level consumers face.

A comparison of prices between October 2024 and October 2026 highlights the burden of accumulated price increases. Essential items like onions, electricity, diesel, and petrol have seen significant hikes. For instance, the price of a 20kg bag of wheat flour rose by 47%, from Rs1,835 to Rs2,697. Beef with bone increased by 26.7%, and a 2.5kg tin of vegetable ghee went up by 18.5%. Transport fuels saw even steeper increases, with petrol rising by 56.9% and high-speed diesel by 59.5%.

Dr Ashfaq Hasan Khan, a former economic adviser to the government, attributes the current price pressures primarily to higher global energy and domestic food prices, particularly wheat. He argues that the petroleum levy of Rs85 per litre is exacerbating inflation in Pakistan. Unlike other countries that have reduced taxation to cushion consumers, Pakistan has not taken similar measures. Khan also criticizes the IMF’s push for higher interest rates, stating that raising rates does not address the supply-side inflation caused by energy costs and food prices.

Under an IMF stabilization program, tighter monetary policy is typically used to curb demand and ease inflation. However, Khan contends that such measures are ineffective when inflation is driven by external factors like energy costs and domestic food prices. He emphasizes that higher interest rates do not directly tackle the underlying sources of the price increases, making them an inappropriate solution for supply-side inflation.