Editorial
CPI inflation surged to 5.6 percent year-on-year in September, marking the sharpest rise since October 2024. The outcome was widely expected, driven primarily by the wheat supply fiasco that disrupted price stability across the country.
The brunt of this inflation was felt in rural Pakistan, where month-on-month inflation soared to 2.76 percent — the highest in 26 months — compared to 1.5 percent in urban areas. This gap reflects a long-standing reality: rural households are disproportionately exposed to food price shocks. With food making up a larger share of their spending, even minor disruptions translate into heavy financial strain. In September, food and beverages accounted for nearly all the monthly inflation in both rural and urban areas, leaving little room for non-food categories in driving the surge.
Wheat and its derivatives were central to the inflationary spiral, contributing more than two-thirds of the monthly impact in rural areas — the largest such share in over 30 months. Perishable items also spiked unusually, with tomatoes surging by 89 percent, alongside double-digit increases in onions and leafy vegetables. While recent floods have not yet translated into broader price shocks, the coming months will determine whether agricultural supply chains stabilize.
One rare source of relief came from electricity tariffs. Fuel cost adjustments brought the average domestic tariff down to Rs20.9 per unit — a two-year low, and a third lower than the March 2024 peak. For years, energy prices have been a persistent driver of inflation; their temporary retreat offers households some breathing space. Similarly, lower global oil prices and a more stable rupee suggest transport inflation may remain subdued.
Yet core inflation continues to resist, holding steady at around 7 percent in both rural and urban areas. If policymakers can maintain price stability through realistic energy pricing and a credible wheat policy, Pakistan may edge closer to the State Bank’s 5–7 percent inflation target in FY26. That would mark a rare success — keeping annual inflation in single digits despite recurring supply shocks.
