ISLAMABAD: Pakistan faces mounting inflationary and macroeconomic risks as the fallout from the Middle East conflict earlier this year reverberates through global energy and commodity markets, the Pakistan Economic Survey 2025-26 warned on Thursday.
The survey noted that disruptions in energy supply chains and rising transportation costs had intensified imported inflation, with higher international prices of petroleum, LNG, edible oil and industrial raw materials pushing up domestic fuel, electricity, transport and food costs.
Rising import bills, it cautioned, could widen the trade deficit, strain the external account and exchange rate stability, and add fiscal pressure on the energy sector during the remainder of FY26 and into FY27.
The year-wise CPI trend also reflected supply-side concerns at the start of FY26, when heavy monsoon rains and floods disrupted agriculture and perishable food supplies.
Despite these challenges, the survey reported that inflation during FY26 remained broadly manageable, supported by prudent macroeconomic policies, improved supply conditions and coordinated administrative measures.
It further said strengthened market monitoring, better availability of essential commodities and close coordination between federal and provincial governments were credited with containing price pressures and providing relief to vulnerable segments of the population.
The outlook, however, remains tied to global energy and commodity pricemovements, geopolitical developments, domestic supply conditions and exchange rate stability.
The government, the survey said, is committed to preserving price stability through timely policy actions, effective market oversight, smooth supply of essential goods and continued institutional coordination.
Inflation remained moderate during the first three quarters of FY26, reflecting fiscal discipline, relative exchange rate stability and improved commodity supplies.
The increase observed towards the end of the year was attributed to both the exceptionally low base of the previous year and renewed external cost pressures, particularly in energy. This was evident in April 2026, when year-on-year CPI inflation rose to 10.9pc compared with just 0.3pc in April 2025.
Underlying inflation remained contained, with the surge concentrated in non-food items, where prices rose nearly 14pc in both urban and rural areas, mainly due to higher energy costs.
Core inflation, excluding food and energy, stayed broadly stable, edging up in urban areas from 7.4pc to 8pe, while easing in rural areas from 9pc to 8.5pc.
According to the survey, these pressures were compounded by external uncertainties and geopolitical tensions affecting global commodity and energy markets.
However, timely policy attention and continued coordination among federal and provincial authorities helped stabilise supply conditions and contain inflationary pressures within manageable limits.
The survey observed that headline inflation was driven more by base effects and external cost pass-through than by a broad-based rise in domestic prices.