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Pakistan’s central bank has warned that inflation may surpass its medium-term target of 5%–7% in the latter half of FY2025-26, driven by flood-induced food shortages and escalating energy prices. According to the State Bank of Pakistan’s (SBP) annual report, heavy floods have disrupted the supply of perishable food items, pushing up food inflation.
The SBP further noted that the July 2025 hike in gas prices and the expiry of the electricity price relief from the last quarter of FY25 would add pressure on energy costs, likely keeping prices elevated through FY26.
Despite these challenges, the SBP remains cautiously optimistic, citing controlled domestic demand, a stable external sector, and a moderate global commodity outlook as balancing factors. However, the report warns of risks from flood damages, geopolitical tensions, and global trade uncertainties that could weigh on economic stability.
“The central bank anticipates that inflation may temporarily rise above the upper bound of the target range in FY26, before easing back within limits by FY27,” the report stated.
Economists believe that sustained policy discipline and improved agricultural recovery will be crucial in managing these inflationary pressures as Pakistan continues its post-flood economic adjustment.
