Inflation in Pakistan surged to 7% in February 2026, the highest since October 2024, driven by electricity price hikes, with fears of a further increase amidst escalating unrest in the Middle East threatening to drive up oil prices.
According to the Pakistan Bureau of Statistics (PBS), the consumer price index (CPI) rose 6.98% year-on-year against 5.8% in January and 1.5% in February 2025. The greatest contributor was electricity tariffs, which jumped 10% from January, following the end to cross-subsidies and imposition of fixed charges.
Core inflation, excluding volatile food and energy prices, reduced slightly. Urban core inflation reduced to 7.1% from 7.2%, though it was below the 7.8% recorded in February 2025. Rural core inflation remained stable at 8.3%, compared with 10.4% a year earlier in February 2025.
The inflationary surge shrank real interest rates by 120 basis points, seemingly validating the State Bank of Pakistan’s decision to maintain the policy rate at 10.5% last month. However, the eight-month average for fiscal 2026 stands at 5.46%, below last year’s 5.85%, and within the government’s forecast of 6-7% inflation.
The Wholesale Price Index (WPI) jumped to 1% during the month under review, up from 0.2% in the previous month and 0.7% in February 2025. It suggests cost pressures at the producer level are increasing and could translate into costlier retail inflation in the coming months, as WPI typically feeds into consumer prices with a lag.
Analysts said the February increase highlights lingering risks from domestic energy reforms, now amplified by Middle East tensions and their potential for spiking the oil import bill, weakening the rupee and driving inflation higher in coming months. With millions of Pakistanis working in Gulf states, any escalation also risks disrupting remittances, a key economic lifeline, and could fuel public discontent at a time when households are already squeezed by power bills and stagnant wages.
During February, food and non-alcoholic beverages recorded inflation of 5.8%, up from 3.9% a month earlier, while housing and utilities rose 9.65% compared to 7.29% in January. Inflation in miscellaneous goods and services climbed to 23% from 20.97%.
Some staple food items year-on-year recorded notable increases. Tomato prices surged 82%, wheat 42.6%, wheat flour 25.9%, butter 16%, fresh fruits 13%, condiments and spices 12.87%. Price of meat increased 11.3%, milk powder 9.4%, dry fruits 8.1%, gur 8.03%, wheat products 7.4%, rice 5.3% and eggs 5.15% over the same month last year.
In contrast, several food categories posted sharp declines, helping offset the impact on overall food inflation. Potato prices plunged 40%, chicken 21.8%, gram pulse 21.7%, besan 19.9%, onions fell 17%, masoor pulse declined 11%, tea 8.6%, mash pulse 4.9% and fresh vegetables 3.9%.
In the non-food segment, gas charges increased 22.9%, postal services 12.6%, newspapers 11.9%, liquefied hydrocarbons 11.6% and education 8.78%.