Pakistan's slower inflation masks persistent high costs for essentials

While inflation in Pakistan has slowed, the cost of everyday essentials remains significantly higher than it was two years ago. This disconnect arises because inflation measures only the rate of price changes, not the overall price level. As a result, consumers continue to feel the financial strain of previous price hikes, even as inflation moderates.

A comparison of prices from the Pakistan Bureau of Statistics reveals the extent of this burden. Between October 2024 and October 2026, the price of a 20kg bag of wheat flour increased by 47%, beef with bone rose by 26.7%, and a 2.5kg tin of vegetable ghee climbed by 18.5%. Fuel prices saw even steeper increases, with petrol rising by 56.9% and high-speed diesel by 59.5%. These individual price hikes highlight the gap between official inflation figures and real-world retail prices.

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. He argues that the petroleum levy of Rs85 per litre is a significant contributor to rising inflation in Pakistan. Unlike demand-driven inflation, which can be addressed through monetary policy, supply-side inflation requires different solutions. Dr Khan criticizes the IMF's push for higher interest rates, stating that raising rates is not the right solution for supply-side inflation.

The distinction between inflation and actual price levels is crucial for understanding the economic challenges faced by consumers. While slower inflation may provide some relief to the government, it does little to alleviate the financial strain on households dealing with higher costs for essential goods and services.