Pakistan’s inflationary landscape painted a mixed picture in July 2025. While headline inflation indicators signaled a sharp cooldown compared to last year, the relief was tempered by surging food prices that hit household budgets.
Official data from the Pakistan Bureau of Statistics revealed that the Consumer Price Index fell dramatically year-on-year, yet essentials such as vegetables, chicken, and sugar continued to strain consumers, keeping inflationary anxieties alive.
Pakistan’s yearly inflation spiraled to 4.07 percent in July 2025, edging higher from 3.2 percent a month earlier, marking its steepest ascent since December 2024. By contrast, the corresponding month of July in the previous year had witnessed a markedly sharper inflationary pulse at 11.09 percent. This renewed surge was primarily driven by a rekindling of housing and utilities tariffs, which vaulted 3.56 percent after a prior slump of 3.28 percent in June. Likewise, transportation expenses surged by 2.7 percent, an uptick from the modest 0.6 percent recorded the month before.
Yet, the upswing was somewhat cushioned by subdued increments in food and non-alcoholic consumables, which slackened to 0.9 percent from 2.6 percent, alongside a fall in recreation and cultural activities, where prices tumbled by 1.5 percent. Other segments such as attire and footwear, intoxicants and tobacco, household furnishings and maintenance, healthcare, hospitality services, and miscellaneous commodities also reported gentler ascensions in July.
This intensified inflationary readout arrived shortly after the State Bank of Pakistan cautioned of a deteriorating price outlook and resolved to maintain its policy rate steady at 11 percent. The central bank’s monetary committee underscored that energy tariffs, particularly natural gas, had ascended more abruptly than anticipated. It emphasized that the real policy rate must remain positive if inflation is to be tethered within the targeted 5 to 7 percent corridor.
Meanwhile, Pakistan continues to navigate stringent fiscal adjustments under a $7 billion IMF arrangement, which includes a contractionary budget unveiled in June, designed to pare down public expenditures and shrink the fiscal chasm. However, independent economists contend that such elevated borrowing costs could obstruct fiscal maneuverability, complicating deficit management and amplifying the weight of debt servicing. Presently, nearly three-fourths of national revenues are being siphoned into interest payments, predominantly on domestic obligations secured from commercial banks.
At present, the real interest rate—calculated as the prevailing benchmark rate minus inflation—stands at 6.93 percent. Sustaining such an elevated positive real rate imperils fiscal durability, as it inflates borrowing costs and magnifies the burden of debt servicing, tightening the government’s already strained financial straits.
In fiscal year 2024-25, the Consumer Price Index (CPI) settled at 4.49 percent, a steep descent from the staggering 23.41 percent witnessed in FY24.
Core inflation—stripped of the volatile swings in food and energy—nudged upward to 7 percent in July, slightly above June’s 6.9 percent, yet still well below the 11.7 percent recorded in July 2024. Urban inflation was reported at 4.4 percent, while rural regions posted a softer 3.5 percent, both markedly lower compared with last year’s 13.2 percent and 8.1 percent, respectively.
The Wholesale Price Index (WPI) continued its downward trajectory, dipping 0.5 percent in July after June’s 0.6 percent decline. This stands in stark contrast to July 2024, when WPI was soaring at 10.4 percent.
Still, volatility was evident in the food basket. Fresh vegetables rocketed by 45.76 percent in July. Chicken followed with a sharp 29.73 percent rise, tomatoes surged 19.9 percent, potatoes climbed 10.97 percent, onions 9.36 percent, sugar 6.11 percent, gur 3.48 percent, and rice 1.46 percent. Yet some relief appeared: eggs slumped 14.5 percent, fresh fruits slipped 7.17 percent, and wheat flour fell 1.03 percent.
For the second consecutive week, essential commodities continued their upward march. The Pakistan Bureau of Statistics (PBS) reported weekly inflation climbing 0.31 percent, while annual inflation edged to 2.21 percent. Out of the tracked items, 17 saw price hikes. Tomatoes jumped by Rs10.42 per kilogram, live broiler chicken by Rs19.67, a dozen eggs by Rs6.19, and a 20-kilogram flour sack surged by more than Rs21. Other staples such as onions, garlic, black gram, and jaggery also registered increases. Conversely, bananas, potatoes, rice, and LPG cylinders became cheaper. Prices of 24 items held steady, while 9 slipped downward.
The government’s attempts to peg sugar at Rs173 per kilogram have largely faltered. Retailers in Islamabad, Karachi, and Peshawar continue to defy official directives, demanding up to Rs190 per kilogram.
According to PBS data, the average sugar price crept upward by 0.52 paisas per kilogram during the week. In Rawalpindi, Gujranwala, Sialkot, and Bannu, sugar traded at Rs185, while in Quetta it sold for Rs182. Hyderabad and Larkana marked Rs181 per kilogram. Only in Lahore, Faisalabad, and Sargodha was sugar found at the prescribed official rate.
Though broader inflation metrics suggest Pakistan has stepped back from the brink of last year’s double-digit turbulence, the persistence of price hikes in everyday essentials underscores a lingering fragility in the economy. Unless corrective measures rein in food inflation and ensure compliance with official price caps, the respite from falling CPI and WPI may prove short-lived for ordinary households already stretched by rising costs.