Pakistan’s inflation is expected to stay elevated in October, with the Finance Division projecting a range of 9.5 to 10.5 per cent for the month. In its Monthly Economic Update and Outlook for October 2026, the division described rising inflation as a key downside risk to the country’s economic outlook, pointing to persistent geopolitical tensions, recurring conflicts in the Gulf region, volatile international oil prices, trade disruptions and rising global inflationary pressures.
According to the report, headline inflation eased to 10.3 per cent in September from 11.1 per cent in August, but the future path remains vulnerable to movements in international energy prices, food supplies and base effects. Average headline Consumer Price Index inflation stood at 10.2 per cent during July to September of the current fiscal year, compared with 4.3 per cent in the corresponding period of the previous year.
Energy costs were a major driver. Brent crude averaged 116.8 dollars per barrel in September, registering a 28.4 per cent increase over August, while natural gas prices also moved upward. The Food and Agriculture Organisation’s Food Price Index increased by 1.5 per cent to 136 points, and rising palm oil and fertiliser prices further increased import costs and agricultural input expenses.
The pressure on households was visible in September’s price data. Transport prices recorded a year-on-year increase of 27.4 per cent, while housing, water, electricity, gas and fuel costs rose by 12.4 per cent. Perishable food prices increased by 11.8 per cent, whereas non-perishable food prices went up by 7.6 per cent.
Growth, industry and the external account
Revised national accounts data placed economic growth at 3.65 per cent for the last fiscal year, slightly below the earlier estimate of 3.70 per cent. Agriculture recorded growth of 3.50 per cent, while industry and services expanded by 3.34 per cent and 3.81 per cent respectively. Large-scale manufacturing grew by 1.9 per cent during July and August, considerably lower than the 4.8 per cent growth registered in the same period last year, and output in August rose by 0.7 per cent year on year but fell by 5 per cent compared with July.
On the external front, the current account deficit widened to 874 million dollars during July to September, compared with 755 million dollars a year earlier, mainly because imports increased faster than exports. Goods imports rose by 14.3 per cent to 17.8 billion dollars, while exports increased by 7.7 per cent to 8.5 billion dollars. Workers’ remittances provided significant support, growing by 14 per cent to 10.9 billion dollars. By October 16, the State Bank of Pakistan’s liquid reserves stood at 21.5 billion dollars, while total liquid reserves reached 26.8 billion dollars.
The report also noted a 3 billion dollar Eurobond issuance in September and tax collection up by 7 per cent to 3,086.2 billion rupees. The Monetary Policy Committee increased the policy rate by 50 basis points to 12 per cent, effective October 27, in response to rising inflationary risks linked to Middle East tensions and persistently high international energy prices. The Finance Division concluded that while improved agricultural output, reserves, remittances and international financing should support activity, continued progress in tax administration, energy efficiency and reforms of state-owned enterprises will be critical to sustaining growth and containing inflation.
