According to the Government of Pakistan report, inflation has become the most significant economic challenge in Pakistan. Over the last three years, this problem didn’t arise suddenly but developed. Worldwide, inflationary pressures have been observed after Covid-19. Domestically, measures taken to address high and increasing fiscal and current account deficits resulted in double-digit inflation on a year-on-year basis since August 2019. The issue was highlighted in November 2021 when both food and non-food components of inflation surpassed single digits.
The average Consumer Price Index (CPI) inflation rate spiked to 29.2 percent in FY 2023, and by May 2023, the year-on-year inflation rate had soared to 38 percent. This affected all CPI components, mainly food and energy, which surpassed core inflation. In FY2023 the Russia-Ukraine conflict triggered a global economic crisis, causing substantial disruptions in food and energy supply chains. Pakistan’s depleted foreign exchange reserves led to currency depreciation, exacerbating inflation. In 2022 the floods also resulted in significant economic damage, severely impacting the agriculture sector and disrupting the supply of perishable essential items, leading to increased prices. Political and economic uncertainties further fueled excessive aggregate demand, compounding inflationary pressure.
| Core Inflation in Pakistan (%) (Base 2015-16) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Period | NFNE | Trimmed | ||||||
| Urban | Rural | Urban | Rural | Urban | Rural | Urban | Rural | |
| YoY | MoM | YoY | MoM | YoY | MoM | YoY | MoM | |
| Aug-2023 | 18.4 | 1.8 | 25.9 | 2.8 | 23.0 | 1.5 | 30.5 | 1.4 |
| Sep-2023 | 18.6 | 1.0 | 27.3 | 2.6 | 25.0 | 1.1 | 33.3 | 1.7 |
| Oct-2023 | 18.5 | 1.2 | 26.7 | 1.0 | 24.6 | 0.6 | 30.4 | 0.7 |
| Nov-2023 | 18.6 | 0.9 | 25.9 | 1.4 | 22.9 | 0.1 | 27.9 | 0.5 |
| Dec-2023 | 18.2 | 0.8 | 25.1 | 0.9 | 23.3 | 0.3 | 28.0 | 0.7 |
| Jan-2024 | 17.8 | 1.1 | 24.6 | 1.2 | 22.1 | 1.0 | 25.8 | 1.2 |
| Feb-2024 | 15.5 | 0.3 | 21.9 | 0.4 | 16.0 | 0.3 | 21.3 | 0.4 |
| Mar-2024 | 12.8 | 0.1 | 20.0 | 0.8 | 14.8 | 0.6 | 18.4 | 0.9 |
| Apr-2024 | 13.1 | 2.1 | 19.3 | 2.0 | 13.4 | 0.5 | 15.0 | 0.6 |
| May-2024 | 12.3 | 0.4 | 17.0 | 0.5 | 11.0 | -0.5 | 10.6 | -0.9 |
| June-2024 | 12.2 | 0.6 | 17.0 | 0.9 | 10.3 | 0.6 | 11.0 | 0.5 |
| July-2024 | 11.7 | 0.7 | 16.9 | 1.1 | 10.3 | 1.2 | 11.3 | 1.7 |
| Aug-2024 | 10.2 | 0.4 | 14.4 | 0.6 | 8.0 | 0.2 | 9.6 | 0.4 |
- CPI inflation General, rose to 9.6 percent on year-on-year basis in August 2024 as against to an increase of 11.1 percent in the last month and 27.4 percent in August 2023. On month-on-month basis, it rose to 0.4 percent in August 2024 as against to a rise of 2.1 percent in the last month and an increase of 1.7 percent in August 2023.
- CPI inflation Urban, rose to 11.7 percent on year-on-year basis in August 2024 as against to an increase of 13.2 percent in the last month and 25.0 percent in August 2023. On month-on-month basis, it rose to 0.3 percent in August 2024 as against to a rise of 2.0 percent in the last month and an increase of 1.6 percent in August 2023.
- CPI inflation Rural, also rose to 6.7 percent on year-on-year basis in August 2024 as against to an increase of 8.1 percent in the previous month and 30.9 percent in August 2023. On month-on-month basis, it grew to 0.6 percent in August 2024 as against to a rise of 2.2 percent in the previous month and a rise of 1.9 percent in August 2023.
- SPI inflation on YoY grew to 10.8 percent in August 2024 as against to a rise of 15.7 percent a month earlier and 27.9 percent in August 2023. On MoM basis, it fell to 0.3 percent in August 2024 as compared to an increase of 2.0 percent a month earlier and an increase of 4.1 percent in August 2023.
- WPI inflation on YoY basis grew to 6.3 percent in August 2024 as against to an increase of 10.4 percent a month earlier and an increase of 24.3 percent in August 2023. On MoM basis, it grew by 0.3 percent in August 2024 as against to a rise of 2.3 percent in the last month and a rise of 4.2 percent in corresponding month of last year i.e. August 2023.
- Measured by non-food non-energy Urban grew to 10.2 percent on (YoY) basis in August 2024 as compared to a rise of 11.7 percent in the previous month and 18.4 percent in August 2023. On (MoM) basis, it increased by 0.4 percent in August 2024 as compared to an increase of 0.7 percent in previous month and an increase of 1.8 percent in corresponding month of last year i.e. August, 2023.
- Measured by non-food non-energy Rural increased to 14.4 percent on (YoY) basis in August 2024 as against to an increase of 16.9 percent in the last month and 25.9 percent in August 2023. On (MoM) basis, it increased by 0.6 percent in August 2024 as against to a rise of 1.1 percent in previous month and an increase of 2.8 percent in corresponding month of last year i.e. August 2023.
- Measured by 20 percent weighted trimmed mean Urban increased to 8.0 percent on (YoY) basis in August 2024 as against to 10.3 percent in August 2023. On (MoM) basis, it grew to 0.2 percent in August 2024 as compared to an increase of 1.2 percent in the previous month and an increase of 1.5 percent in corresponding month of last year i.e. August 2023.
- Measured by 20 percent weighted trimmed mean Rural grew to 9.6 percent on (YoY) basis in August 2024 as compared to 11.3 percent in the last month and 30.5 percent in August 2023. On (MoM) basis, it increased to 0.4 percent in August 2024 as against to a rise of 1.7 percent in the previous month and an increase of 1.4 percent in corresponding month of last year i.e. August 2023.