Rising inflation marks July at 4.1%, attributed to escalating costs

Rising inflation marks July at 4.1%, attributed to escalating costs

Pakistan's Annual Inflation Rises to 4.1% in July 2025

Pakistan's annual inflation rate has climbed to 4.1% in July 2025, marking the highest inflation rate since December 2024 [1][3][5]. This increase was primarily driven by rising prices of food items and fuel costs, pushing the consumer price index higher compared to the previous month (3.2% in June) [5].

Key contributing factors to this inflation acceleration include:

1. Increase in food prices: Essential food items experienced upward price pressure, acting as a primary driver of the inflation rise [3][5]. Notable increases include a 14.27% year-on-year increase in pulse moong prices, a 21.66% increase in sugar prices, and a 14.16% increase in beef prices [2].
2. Rising fuel costs: Higher fuel prices added to overall consumer expenses, contributing to the inflation momentum [5]. For instance, LPG prices increased by 1.39% on a week-on-week basis in July 2025 [2].
3. Urban inflation dynamics: Urban areas saw a Consumer Price Index (CPI) increase to 4.4% year-on-year in July, up from 3.0% in June, indicating a broader price rise across metropolitan consumer baskets [4].

The finance ministry had anticipated inflation for July to stay within 3.5-4.5%, reflecting expectations of relatively stable prices. However, the actual increase was on the higher side of that range, mainly due to supply conditions and cost pressures in food and energy sectors [5].

Despite these challenges, it's worth noting that on a week-on-week basis, prices of 11 items increased, 12 items decreased, and 28 items remained stable in July 2025 [6]. For example, beef prices decreased by 0.10% on a week-on-week basis in July 2025, and eggs prices decreased by 1.80% [2].

In July 2022, SPI inflation decreased by 0.9% year-on-year, compared to a decrease of 1.9% a month earlier [7]. Pakistan is currently implementing a series of economic reforms under a $7 billion International Monetary Fund program [8]. Additionally, a contractionary government budget was passed in June 2022, aiming to curb the fiscal deficit [9].

However, the impact of these economic changes on the overall economy and the population of Pakistan remains unclear [10]. The State Bank of Pakistan left the key interest rate unchanged at 11% due to a deteriorating inflation outlook [11]. The real policy rate should be adequately positive to keep inflation within the 5%-7% target range, according to the State Bank of Pakistan's monetary policy committee [11].

References:

1. The News International
2. Dawn
3. Business Recorder
4. The Express Tribune
5. The Express Tribune
6. The Express Tribune
7. The Express Tribune
8. The Express Tribune
9. The Express Tribune
10. The Express Tribune
11. The Express Tribune
12. The finance ministry, based in Pakistan, anticipated inflation for July 2025 to be within 3.5-4.5%, but the actual increase was on the higher side of that range, affecting a national and global business landscape.
13. Despite the inflation increase, it's important to note that in July 2025, the World Bank is currently working with Pakistan under a $7 billion International Monetary Fund program, which includes economic reforms meant to curb such increases.
14. As a result of the rising inflation, the State Bank of Pakistan, a national institution, left the key interest rate unchanged at 11%, signaling an ongoing concern and a need for monetary policy adjustments to maintain the inflation within the 5%-7% target range.

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