Pakistan seems to have entered the new fiscal year with some semblance of economic relief. Headline inflation eased to 11.1 per cent in June from 11.7 per cent in May, while the consumer price index also fell 0.30 per cent month-on-month, mainly on account of lower transport costs, motor fuel and electricity charges. This is welcome, particularly after months in which imported energy costs and geopolitical uncertainty kept price expectations unsettled.
Contrary to what one may hope, this is not yet a turning point. Average inflation for FY26 still rose to 7.05 per cent, compared to 4.49 per cent a year earlier. That means households are not experiencing relief from a clean base. Sadly, they are simply absorbing a slowdown in price increases after two years of accumulated pressure. More importantly, the June print hides uncomfortable details. Food inflation accelerated to 9.4 per cent, the highest since April 2024, with sharp increases in perishable items, while housing, utilities and transport costs are still far above last year’s levels. Grocery staples, dairy and meat products have all recorded major increases over the past year.
Financial markets, however, chose to celebrate. On July 1, the benchmark KSE-100 index gained 3,748.40 points, or 2.08 per cent, to close at a record 184,050.10. Investors are clearly pricing in lower inflation, possible monetary easing and improved corporate earnings. This optimism is understandable, but it should not be confused with broad-based recovery.
The government’s own economic outlook presents a similarly upbeat picture. It points to 3.7 per cent GDP growth, a primary fiscal surplus, a current-account surplus and improved investor confidence. It also expects easing geopolitical tensions and lower crude prices to support the FY27 outlook. Yet much of this relief has come from external conditions, not domestic reform. If global oil prices reverse, Pakistan’s inflation path could again come under pressure.
This is why the quality of economic management now matters more than the headline numbers. Monthly economic updates must be timely, complete and credible.
The government should now resist the temptation to treat cheaper oil and a buoyant stock market as proof of success. Lower fuel prices must be passed through transparently, not absorbed through higher levies.
This year will be judged not by one softer inflation print or one record market close, but by whether stabilisation turns into credible taxation, transparent data, lower business costs and private-sector-led growth. *