CPI-based inflation to exceed 10pc in 4QFY26
The IMF projects Pakistan's CPI-based inflation to exceed 10% in Q4 FY2026 and reach 8.4% in FY2027, urging tight monetary policies amid rising global oil prices and Middle East tensions.
- IMF's inflation projections for Pakistan.
- Factors driving Pakistan's rising inflationary pressures.
- State Bank of Pakistan's tight monetary policy.
ISLAMABAD: The International Monetary Fund (IMF) has projected that Consumer Price Index (CPI)-based inflation will exceed 10 percent in the fourth quarter of fiscal year 2026 and reach 8.4 percent in FY2027.
This was stated in the “third review under the Extended Fund Facility and second review under the Resilience and Sustainability Facility arrangement”.
The fund warned of renewed inflationary pressures from rising global oil prices and Middle East tensions and urged the State Bank of Pakistan (SBP) to keep policies tight, as reported on May 15, 2026.
READ ALSO: Feb CPI inflation clocks in at 7pc YoY
In the previous year the rate of inflation in the country was recorded at 4.5 percent. The hike in CPI inflation is temporarily due to adverse energy and food prices, but appropriately tight monetary policy is expected to support a durable return of headline CPI inflation to the target range in FY28, the report noted.
CPI inflation increased to 10.9 percent on Year on Year (YoY) in April, driven by a combination of higher fuel prices and adverse food price base effects, broadly in line with the staff report projections. Core inflation increased to 8.2 percent on YoY basis in April, driven by the pass- through of higher fuel costs to transport service prices. According to the SBP, the tightening of the policy rate was aimed at containing emerging inflationary pressures and limiting second round effects from higher energy prices.
The authorities’ response, the Staff Level Agreement on the third review stated is firmly anchored in programme principles with allowing prices and the exchange rate to adjust, maintaining fiscal discipline, and deploying only targeted and budget- neutral support for vulnerable households, while preserving the flexibility to recalibrate as conditions evolve.
The headline inflation accelerated to 7.3 percent in March 2026 which is the highest since August 2024—breaching the SBP’s 5–7 percent target range for the first time since October 2024. In this context, the SBP stands ready to tighten policy further as needed to prevent second-round effects from becoming entrenched, while continuing reforms to strengthen policy communication and the monetary transmission mechanism.
Copyright Business Recorder, 2026
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