Zafar Iqbal
Pakistan’s May inflation figures arrived with a surface calm that deserves closer inspection. Headline consumer price inflation registered 11.7 percent on a year-on-year basis. That number is uncomfortable, but it sits well below the peaks Pakistan endured during the last inflationary cycle. Food inflation came in at 7.9 percent year-on-year, and the month-on-month movement in the food group was a negligible 0.10 percent. At first reading, one might exhale. That exhale would be premature.
Beneath the headline, the food basket is already fracturing along politically sensitive lines. Non-perishable food prices rose 9.4 percent nationally and 10.9 percent in rural areas. Wheat and wheat flour tell a sharper story: urban wheat is up 62.2 percent year-on-year, wheat flour up 54.4 percent, while rural wheat and wheat flour rose 63.5 percent and 62.7 percent respectively. These are not marginal movements. These are staple prices, and staple prices carry social weight that aggregate indices do not.
Perishables continue to swing in both directions, and their volatility flatters the headline in some months and distorts it in others. The food story, therefore, is not one of uniform acceleration. It is one of concentrated pressure in the items that matter most to the poor, partially obscured by noise in tomatoes, onions, and vegetables. That distinction carries real analytical importance.
Pakistan may now be entering a period where food inflation is not merely a domestic supply-chain problem. It is simultaneously an external commodity problem, a climate problem, and a fiscal problem. These pressures are beginning to converge.
The IMF’s latest review does not forecast an imminent food shock. It characterises the regional war’s impact as primarily energy-led, with more modest consequences for food and core inflation. But this framing carries its own analytical risk. Energy inflation in Pakistan does not remain confined to the energy sector. Diesel is embedded in irrigation, harvesting, freight, inter-city transport, mandi movement, and cold-chain logistics. What begins at the fuel pump travels through the entire food system before it reaches the consumer. The IMF can model energy and food as separate categories. The Pakistani economy does not observe that separation.
The fiscal response to the fuel shock has already demonstrated the constraint. The government temporarily delayed fuel price adjustments through a subsidy to oil marketing companies costing 0.1 percent of GDP, later reversed, while retaining a partial reduction in petroleum levy on diesel. Targeted relief was announced for motorbike owners, small farmers, and subsidised public transport in Punjab. All of this is described as budget neutral. Budget neutral under an IMF programme means that every cushion must be paid for by a cut somewhere else. Pakistan does not have a food shock reserve. It has a primary balance target and a long institutional memory of converting commodity volatility into arrears, import mispricing, or administrative controls.
The fertiliser question may carry more weight than current commentary suggests. Pakistan’s urea exposure is partially cushioned by domestic production, but diammonium phosphate is a different matter. A prolonged disruption in DAP supply chains, or even a sharp price increase at the wrong planting moment, could alter Kharif decisions in ways that do not show up in CPI immediately. Farmers may reduce input intensity, delay application, switch crops, or accept lower expected yields. These decisions appear later: in market arrivals, farmgate prices, and substitution pressure across grains. The damage is done quietly, long before the headline responds.
The global backdrop offers little reassurance. The latest ENSO outlook points toward El Niño conditions, with elevated probability of persistence through the northern hemisphere winter. El Niño does not produce uniform shocks, but it raises the probability of weather anomalies across major agricultural regions. The relevant point for Pakistan is not whether every major producer suffers simultaneously. It is that global commodity balance sheets are already tight enough that weather disruption does not need to be catastrophic to become price-relevant.
Corn provides an instructive illustration. The USDA’s May projections show world corn production for 2026-27 falling below last year’s record, with consumption expected to exceed production by 20 million metric tonnes. Global ending stocks, if realised, would reach their lowest level since 2013-14. Pakistan is not a large corn importer, but corn prices sit inside a broader feed, poultry, dairy, and grain substitution complex. When corn reprices, the signal travels.
Rice presents a two-sided problem. Global output is projected to decline for the first time since 2015-16, while trade is expected to reach a record level. Export opportunity exists for Pakistan. But export opportunity is not costless in a poorly buffered domestic market. Higher external prices transmit back into domestic wholesale and retail markets. The same price that improves the trade account can worsen the kitchen account.
Wheat remains the most politically charged channel. Pakistan’s wheat market is still recovering from procurement confusion, stock mismanagement, and eroded farmer confidence. Wheat flour prices are already rising sharply in the CPI basket. A global grain rally, even one driven primarily by corn or rice fundamentals, can pull domestic wheat prices through substitution effects. Traders, processors, and households do not operate in commodity silos. Once grains begin repricing, relative prices adjust across the entire complex. Administrative attempts to isolate wheat from this adjustment typically produce leakage, hoarding, or renewed subsidy pressure.
Edible oil is a cleaner but equally painful story. Pakistan’s dependence on imported vegetable oil makes the food basket directly exposed to global oilseed prices, freight costs, and exchange rate movement. Cooking oil and ghee are mass-consumption items with no easy substitutes for low-income households.
The risk, taken whole, is not that any single channel produces a food shock. The risk is that multiple channels converge simultaneously: fuel into logistics, DAP into Kharif yields, El Niño into global crop uncertainty, grain prices into local substitution, edible oil into direct import inflation, and fiscal constraints into delayed or distorted policy response. Each pressure is manageable in isolation. Together, they can convert a moderate inflationary impulse into a broader food-price episode.
Pakistan’s instinctive response to food inflation remains administratively forceful and economically ineffective. Prices rise, and the state searches for culprits rather than price signals. It prefers raids to data, bans to buffers, and committees to market intelligence. What the next food shock will actually require is pre-emptive fertiliser monitoring, credible acreage and input-use data, predictable trade policy, honest wheat stock disclosure, and targeted income support that does not compromise the fiscal programme.
A food shock is still a risk, not a forecast. But the risk now has enough moving parts to demand serious attention. Waiting for the CPI headline to confirm it would be entirely consistent with past practice. It would also be entirely too late.
