EDITORIAL: Pakistan Bureau of Statistics (PBS) October price indices uploaded on its website reveal a steady decline in headline inflation from August this year to October – 11.1 percent in August to 10.3 percent in September to the October figure of 9.6 percent. This decline, given the continuing Middle East conflict that is fuelling inflation world-wide including in the West with protesters storming the streets from France to Berlin to Italy, is indicative of two elements.
First, given the inflationary pressures world-wide due to the ongoing Middle East crisis countries began to extend some relief to their public – either through a reduction in taxes on petroleum and products and/or direct subsidies at the pump. The Pakistani government was no exception though the subsidy announced soon after the 28 February US/Israeli attack on Iran was suspended subsequent to the International Monetary Fund’s (IMF’s) concerns that as it was not budgeted the subsidy would derail the government’s pledged macroeconomic reforms. On 7 October, at the conclusion of the fourth review of the ongoing programme, the Fund in its press release cautioned that “the fuel support scheme should be phased out promptly, given its high cost and broad targeting. Any future fuel support—should oil prices surprise on the upside—should be limited, time-bound, targeted using established social assistance programs, and accommodated within the FY27 budget envelope.”
And, second, our data credibility is suspect and the IMF in its October 2024 documents titled “2024 Article IV Consultations and request for an Extended Arrangement Under the Extended Fund facility” noted that “important shortcomings remain in the source data available for sectors accounting for around a third of Gross Domestic Product, while there are issues with the granularity and reliability of the Government Finance Statistics (GFS).” And added that the Fund would support a technical assistance (TA) on the GFS and a new PPI (Producer Price Index) and the PBS will soon begin fieldwork for four major surveys ahead of the upcoming National Accounts rebasing to FY26. The TA was scheduled to be completed by end June 2026; however, the PBS staff told Business Recorder that the Fund had indicated further refinements/adjustments which accounted for a deferral of the scheduled end till end October this year. However, repeated request to the PBS to indicate whether the TA has been completed and reviewed by the Fund has not yet elicited a response.
Core inflation, non-food non-energy, declined from 8.6 percent to 7.8 percent – a decline of 0.8 percent, which, in months past, was used as a justification to reduce the policy rate. On 26 October, the Monetary Policy Committee raised the policy rate by 50 basis points by incorrectly projecting that “core inflation has steadied at an elevated level of around 8.4 percent.” This, critics argue, may well be yet another evidence of their claim that the MPC is determining its policy rate based on flawed projections and almost certainly on IMF recommendations.
In conclusion, the rate of inflation this year is significantly higher than last year’s rate—rising from 4.79 percent to 10.05 percent—and is undoubtedly due largely to the Middle East conflict. The most substantial increase is in the Wholesale Price Index (WPI), which surged from 0.05 percent in 2025–26 to 12.10 percent this year. Statisticians argue that because the WPI has risen so dramatically, the resulting pressure on the poor and vulnerable is clearly reflected in the Sensitive Price Index (SPI), which has climbed from 2.76 percent last year to 9.62 percent this year.
Copyright Business Recorder, 2026