Inflation in October expected to remain within 5–6%: Ministry

October 28, 2025 (MLN): Inflation in October 2025 is expected to remain contained within the 5–6% range, despite temporary price pressures stemming from flood-related supply disruptions and border closures, according to the Monthly Economic Update & Outlook for October 2025.

The Government of Pakistan, Finance Division, Economic Adviser’s Wing, in its report, further stated that while food prices have come under some pressure, the overall inflation trajectory is likely to stay within the government’s target range, supported by prudent fiscal and monetary management.

Headline inflation stood at 5.6% year-on-year in September 2025, compared to 3.0% in August and 6.9% in the same month last year.

On a monthly basis, inflation rose 2.0% after two months of decline. The quarterly average came in at 4.2%, sharply lower than 9.2% during the corresponding period last year.

Key contributors were education, health, clothing, and non-perishable food items, while perishable food prices recorded a decline.

Despite these pressures, the Finance Division said that Pakistan’s economic recovery remains firmly on track.

The country’s performance under the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) has strengthened investor confidence, while fiscal discipline, contained expenditures, and higher revenues continue to underpin stability.

The report pointed out that Pakistan’s Credit Default Swap (CDS) probability has fallen by 2,200 basis points over the past fifteen months, while the Sustainable Financing Framework earned an “Excellent” alignment score from Sustainable Fitch, confirming full compliance with international green and social financing standards.

Fiscal indicators improved significantly during the first quarter of FY2026.

Net federal revenues jumped 231% to Rs3,269.8 billion, largely driven by a 721% surge in non-tax revenues, including State Bank profits, petroleum levies, and dividends, while FBR tax collections grew 14%.

Total expenditures rose just 7.6%, enabling the government to post a federal fiscal surplus of Rs1.5 trillion and a primary surplus of Rs2.9 trillion, compared to a deficit of Rs648.8 billion a year earlier.

The external sector showed resilience, supported by steady exports and strong remittance inflows.

During Jul–Sep FY2026, the current account deficit stood at $594 million, compared to $502 million last year, but notably turned into a $110 million surplus in September.

Exports grew 6.5% to $7.9 billion, led by knitwear, garments, and bedwear, while imports increased 8.3% to $15.4 billion, mainly due to higher petroleum and palm oil imports.

Remittances climbed 8.4% to $9.5 billion, with Saudi Arabia and the UAE accounting for nearly half of total inflows. Foreign exchange reserves rose to $19.9 billion, including $14.5 billion held by the State Bank.

Industrial performance continued to strengthen. Large-Scale Manufacturing (LSM) grew 4.4% in Jul–Aug FY2026, with 12 sectors recording positive growth, including automobiles, cement, electrical equipment, and wearing apparel.

Automobile production surged, with cars up 74%, trucks and buses up 105%, and jeeps and pickups up 48.7%. Cement dispatches climbed 16% to 12.2 million tonnes, reflecting robust construction activity.

On the financial front, the Pakistan Stock Exchange (PSX) maintained its record-breaking rally.

The KSE-100 Index rose 16,875 points in September to close at 165,493, while total market capitalization expanded to Rs19.2 trillion by October 22, 2025.

The Finance Division attributed this bullish momentum to enhanced investor confidence following global rating upgrades by Fitch, S&P, and Moody’s, and continued reform progress under CPEC Phase 2.0 and privatization initiatives.

The report concludes that Pakistan’s reform trajectory, anchored in fiscal consolidation, digital governance, and public-private partnerships, continues to bolster macroeconomic stability.

Despite localized price shocks, the broader economic outlook remains positive, with the government confident of sustaining growth momentum through policy continuity and structural reforms.

Global Economic Outlook

The report’s global section, based on the IMF’s World Economic Outlook (October 2025), highlights that global growth is projected at 3.2% in 2025 and 3.1% in 2026, reflecting moderate expansion amid persistent policy and geopolitical uncertainties.

Advanced economies are expected to grow 1.6%, while emerging markets will expand at a faster pace, driven by Asia. The U.S. economy is forecast to grow 2.0% in 2025, the U.K. 1.3%, China 4.8%, and the Euro Area 1.2%.

The global inflation outlook has improved but remains uneven.

Headline inflation is expected to average 4.2% in 2025 and 3.7% in 2026. Commodity prices have shown mixed trends; energy prices declined by 0.5%, led by lower Australian coal prices, while non-energy commodities rose by 1% due to higher food and metals prices.

The FAO Food Price Index averaged 128.8 points in September, down slightly from August but 3.4% higher year-on-year.

Central banks in advanced economies have begun easing monetary policy. The U.S. Federal Reserve cut its policy rate by 25 basis points in September, bringing it within the 4.00–4.25% range, signaling the start of a gradual normalization cycle.

Meanwhile, global business activity, measured by the J.P. Morgan Global PMI Composite Output Index, stood at 52.4 in September, consistent with a 2.7% annualized global growth rate.

Pakistan’s major trading partners, the U.S., U.K., China, and Euro Area, continue to show improving leading indicators, suggesting stronger export prospects for the country in the months ahead.

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