Pakistan inflation seen returning to double digits as food, fuel costs rise

Pakistan's headline inflation likely returned to double digits in August, driven by higher food and transport costs alongside a low base effect from last year. Estimates from Insight Securities and Topline Securities point to a sharp acceleration after inflation briefly eased into single digits in July.

What is Pakistan's inflation rate expected to be in August?

Pakistan's Consumer Price Index is projected to rise 10.75% to 11.25% year-on-year in August, according to Insight Securities, up from 9.21% in July and just 2.99% in August 2025. Topline Securities put its estimate slightly higher, at about 11.3%, driven mainly by food and fuel prices.

On a month-on-month basis, inflation is projected to increase by about 1.1% to 1.3% in August. Food and transport prices have emerged as the main drivers behind the jump, according to both brokerages.

Why are food prices pushing inflation higher?

Insight Securities expects food prices to rise 1.82% month-on-month, led by sharp increases in onions, eggs, pulse gram and wheat. Onion prices are estimated to have jumped 48%, while eggs rose 10%, pulse gram 7% and wheat 6% over the month.

Topline Securities also flagged perishable food items and elevated wheat prices as key sources of pressure. It said wheat prices remained high due to hoarding and rising global prices, adding further strain to household food budgets.

How much have fuel and transport costs risen?

Transport prices are expected to rise about 3% month-on-month, mainly due to higher international oil prices and increased dealer margins, according to Insight Securities. Topline Securities estimated that motor fuel prices alone rose 10.9% during the month.

Pakistan calculates fuel prices using a weighted-average mechanism applied through the last day of the month, so changes in international oil prices feed into the domestic inflation basket with a lag. Insight Securities expects motor fuel to contribute about 5% to the rise in the transport index.

What is happening with housing and utility costs?

The Housing, Water, Electricity and Gas category is projected to rise 0.17% month-on-month in August, according to Insight Securities. Electricity charges are estimated to increase by about 1.05%, partly offset by a 1.85% decline in liquefied petroleum gas prices.

The rise in electricity charges was mainly driven by a higher Fuel Charges Adjustment of PKR 0.7503 per kilowatt-hour in August, compared with PKR 0.3364 per kWh in July, along with a negative Quarterly Tariff Adjustment of PKR 1.9857 per kWh. Topline Securities expects core inflation to remain sticky, at about 8.9% for the urban basket and 8.8% for the rural basket.

What does this mean for interest rates and the outlook?

With inflation expected at 10.75% to 11.25%, Pakistan's real interest rate is likely to stay positive at about 25 to 75 basis points in August, according to Insight Securities. That remains well below the country's historical average real rate of around 200 to 300 basis points.

Inflation is expected to moderate as the low base effect fades, though the outlook stays vulnerable to geopolitical developments and global commodity price swings. Topline Securities said weather disruptions, further increases in international commodity prices and continued pressure on domestic wheat prices could create upside risks.

Despite the prolonged US-Iran conflict, Pakistan's economy has remained relatively resilient, supported by contained external imbalances, strong remittance inflows and fiscal discipline, according to Topline Securities. Insight Securities expects the State Bank of Pakistan to hold its policy rate steady at the September monetary policy meeting, while Topline projects average inflation of about 9.5% over the next 12 months, a level that could eventually give the central bank room to resume monetary easing.