EDITORIAL: The return of rising inflation, with consumer prices climbing to 5.6 percent in September – nearly double the previous month and the highest level in 10 months – signals a risk that extends well beyond the numbers. It comes as the country struggles with the aftermath of floods that have destroyed livelihoods and forced households into survival mode.
The scars of the recent hyperinflationary period also remain fresh in public memory. So any renewed surge in prices will naturally deepen insecurity and erode fragile confidence in the economy’s recovery.
The acceleration was driven by food costs, reversing last month’s decline and climbing more than 5 percent year-on-year.
Tomato jumped by 65 percent, wheat by almost 38 percent, flour by 34 percent, and onion by 29 percent. Such increases feed directly into daily expenses of households that already spend most of their income on essentials.
The rise in transport costs, linked to fuel prices, compounds the pressure by passing higher costs through to distribution chains. When floods cut supply and government policy adds to energy costs, the result is a cost-of-living squeeze that no monetary policy adjustment can quickly relieve.
The danger lies in the combination of external shocks and weak resilience. Flood damage has restricted farm supplies, while energy prices were raised again this week, with petrol now above Rs268 and diesel close to Rs277 per litre. Diesel in particular drives food inflation because it fuels transport and agricultural machinery. Levies of nearly Rs80 per litre, plus customs duties, highlight how fiscal dependence on petroleum taxation continues to aggravate inflation just as natural disasters amplify it. The contradiction is stark: households face higher prices to fill a revenue gap the government has been unable to close elsewhere.
The State Bank of Pakistan faces a policy dilemma. Its policy rate remains at 11 percent and will be reviewed at the end of October. Independent economists argue for a reduction to single digits, pointing to the burden of debt servicing that already absorbs three-fourths of government revenue.
Yet the latest rise in core inflation, now at 7 percent, will constrain the central bank’s room to ease. High borrowing costs weaken investment and fiscal space, but without credible measures to address food and fuel inflation, cutting rates could prove premature.
The political and social context heightens the risk. A fragile coalition government cannot afford the perception of indifference to rising prices, particularly after the devastation of recent floods.
Public patience has been eroded by years of inflation above sustainable levels. Any sense that relief is temporary or cosmetic could spark wider discontent at a moment when the state needs to project stability. Price volatility in essentials, when combined with visible policy contradictions, has the potential to fuel not just economic anxiety but political anger.
The priority must be to restore credibility through consistent, pragmatic action. That means targeted relief for the most vulnerable, better management of agricultural supply chains disrupted by floods, and clarity in fiscal policy. If petroleum levies are the government’s revenue anchor, then transparency and compensation measures are necessary to limit their regressive impact.
Parliament must be engaged to ensure political ownership of these choices. A purely monetary response will not resolve price pressures rooted in food and energy supply.
Inflation’s return is not a temporary spike to be absorbed and forgotten. It is a reminder of the structural weaknesses that leave the economy exposed to shocks, natural and policy-driven alike. With memories of record high inflation still raw, the risk is that households will lose confidence in price stability altogether.
Once that expectation sets in, the damage to both governance and growth becomes far harder to reverse. This moment demands seriousness from the government and coherence between fiscal and monetary policy. Without it, the cost of living will once again become the single most destabilising force in the economy.
Copyright Business Recorder, 2025
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