Why Pakistan’s Inflation Is Still Near 10% Despite Economic Stabilisation

Key Takeaways

• The IMF projects inflation of 9.9% for FY2026-27, which means prices are still rising much faster than most households would like.
• Energy import costs, exchange-rate moves, and global oil prices are the main drivers, and the government controls only some of them.
• Stabilisation has stopped the crisis from getting worse, but it has not yet brought prices back to comfortable levels.
• Lower inflation would most help people on fixed incomes, shopkeepers with thin margins, and workers whose wages lag behind food and fuel costs.

Pakistan’s economy has stopped sliding, but that is not the same as recovering. Inflation is still close to 10%, which means a basket of goods that cost 100 rupees a year ago now costs about 110. The IMF’s latest projection for FY2026-27 is 9.9%, so the state does not expect a sharp drop soon.

The reason is simple to describe and harder to fix. Pakistan imports much of its energy, pays for it in dollars, and passes the cost to households through fuel and electricity prices. When the rupee weakens or global oil rises, prices follow quickly. When they fall, the relief arrives more slowly.

Energy Is the Biggest Lever

Oil and gas make up a large share of Pakistan’s import bill. Each time the price of crude moves in global markets, the cost of petrol, diesel, and power changes at home. Transport costs then ripple through to food, because trucks carry vegetables, flour, and cooking oil across the country.

Think of a bus fare in Lahore. When diesel rises, the operator asks for more per trip. The vegetable seller at the next stop pays more to bring stock to market, so tomato prices climb too. Nobody decided that tomatoes should cost more. The energy bill did the deciding.

The Exchange Rate Problem

A weaker rupee makes imports more expensive in rupee terms. That includes fuel, machinery, medicines, and raw materials for factories. Exporters can benefit from a cheaper currency, but households and importers feel the pain first.

Policy has tried to manage this by holding the rupee within a controlled range. That approach limits sudden shocks, but it can also leave the currency overvalued in some periods, which hurts exporters. The balance between stability and competitiveness is one of the hardest choices facing policymakers.

What the IMF Projects

The IMF’s projection of 9.9% inflation and 3.5% growth for FY2026-27 tells a specific story. The economy is expected to expand modestly while prices stay high. Growth at that pace is not enough to create jobs quickly for a population that keeps growing.

The projection also depends on assumptions about oil prices, exchange rates, and fiscal discipline. If oil stays above current levels, inflation could stay higher for longer. If it falls, the outlook improves, but the government still needs to collect enough revenue to avoid borrowing more.

Where Economists Disagree

Some analysts argue that inflation will fall steadily once the effects of past currency moves pass through. Others warn that energy subsidies, circular debt in the power sector, and tax increases keep pushing prices up. Both views have evidence behind them, and the outcome will depend on which pressure proves stronger.

It is fair to say that inflation expectations matter. If businesses and workers expect prices to keep rising, they set prices and wages higher, which makes inflation harder to bring down.

What This Means for You

If your income rises slowly, focus on the categories where prices move most: food, fuel, and power. Track your own spending for three months to see where your money actually goes. A household budget built on real numbers is more useful than a general rule.

If you run a small shop, watch your supplier costs closely and review prices at least monthly. Passing on costs too late can hurt cash flow, and passing them on too quickly can cost you customers.

What to Watch Next

• Monthly consumer price index releases from the Pakistan Bureau of Statistics.
• State Bank of Pakistan policy rate decisions, which influence borrowing costs and inflation expectations.
• Global oil price movements and any changes to domestic petroleum pricing.
• The next IMF programme review, which will test whether the inflation path matches the projection.

Confirm each date on the official calendars before you plan around it.

Frequently Asked Questions

Why is inflation still high if the economy has stabilised?

Stabilisation means the most acute crisis has eased. It does not mean prices have fallen. Past currency falls and energy costs continue to work their way into shop prices over time.

Does the exchange rate cause inflation? It is one important cause. When the rupee weakens, imported goods and fuel cost more in local currency, and those costs spread across the economy.

Will inflation fall to pre-crisis levels soon?

Not on current projections. The IMF’s FY2026-27 figure of 9.9% suggests prices will stay elevated for some time.

What can households do right now?

Focus on fixed costs such as power and transport, compare prices across suppliers, and review any income-linked support you may qualify for.

Conclusion

Inflation near 10% is the price of a fragile recovery, and it will not disappear with one good month of data. The real test is whether energy, the currency, and public finances move in the same direction for long enough to lower prices. Watch the monthly CPI, and you will see the trend before the headlines do.