Pakistan’s headline inflation likely returned to double digits in August, driven by higher food and transport costs and a low base effect, according to estimates from Insight Securities and Topline Securities.
The Consumer Price Index is expected to rise 10.75-11.25% year-on-year in August, compared with 9.21% in July and 2.99% in August 2025, Insight Securities said. Topline Securities estimated inflation at about 11.3% year-on-year, up from 9.2% in July.
On a month-on-month basis, inflation is projected to increase about 1.1-1.3% in August, with food and transport prices emerging as the main drivers.
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 increased 48%, eggs 10%, pulse gram 7% and wheat 6%. Topline Securities also identified perishable food items and elevated wheat prices as key sources of pressure. It said wheat prices remained elevated amid hoarding and higher global prices.
Transport prices are expected to increase about 3% month-on-month, primarily because of higher international oil prices and increased dealer margins, Insight Securities said. Motor fuel prices are estimated to have risen 10.9% during the month, according to Topline Securities. Insight expects motor fuel to contribute about 5% to the increase in the transport index.
Pakistan calculates fuel prices using a weighted-average mechanism through the last day of the month, which means changes in international oil prices can feed into the domestic inflation basket with a lag.
The Housing, Water, Electricity and Gas category is projected to increase 0.17% month-on-month in August, according to Insight Securities. Electricity charges are estimated to rise about 1.05%, partly offset by a 1.85% decline in liquefied petroleum gas prices.
The increase in electricity charges was mainly attributed to a higher Fuel Charges Adjustment of Rs. 0.7503 per kilowatt-hour in August, compared with Rs. 0.3364/kWh in July, along with a negative Quarterly Tariff Adjustment of Rs. 1.9857/kWh.
Topline Securities expects core inflation to remain sticky at about 8.9% for the urban basket and 8.8% for the rural basket.
The return of headline inflation to double digits comes after inflation briefly eased into single digits in July. Analysts attributed the August acceleration primarily to higher food prices, retail fuel costs and the low comparison base from last year. With inflation expected at 10.75-11.25%, Pakistan’s real interest rate is likely to remain positive at about 25-75 basis points in August, Insight Securities said. That compares with the country’s historical average real rate of about 200-300 basis points.
Outlook
Inflation is expected to moderate as the low-base effect fades, although the outlook remains vulnerable to geopolitical developments and movements in global commodity prices, analysts said.
Topline Securities said weather-related disruptions, further increases in international commodity prices and continued pressure on domestic wheat prices could create upside risks.
Despite the prolonged U.S.-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 maintain its policy rate at the upcoming September monetary policy meeting. Topline Securities estimates average inflation at about 9.5% over the next 12 months, a level that could eventually provide the central bank with some room to resume monetary easing.