PAKISTAN’S return to double-digit inflation after 21 months signals renewed economic strain where external shocks and domestic vulnerabilities converge in ways that disproportionately burden ordinary households. The April CPI inflation’s spike to 11pc is attributable to rising fuel costs, transport fares and volatile food prices on disruptions in energy supplies linked to the Strait of Hormuz blockade. The crisis exposes Pakistan’s heavy dependence on imported fuels which drives geopolitical tensions directly into domestic price instability. The near tripling of the weekly oil import bill to $800m from $300m before the US-Israel war on Iran began on Feb 28 underscores how quickly external shocks can overwhelm our feeble macroeconomic stability. Persistently elevated non-food inflation, especially in housing, transport and utilities, further compounds the strain. These are largely non-discretionary expenditures, leaving households with limited ability to adjust consumption. The result is growing pressure on real incomes, forcing households to cut back on spending even on essentials.

The steep rise in transport fares and perishable food prices shows that inflation is being driven by higher costs, hitting quickly and placing a heavier burden on lower-income households. The State Bank’s decision to raise its key policy rate by 100 bps to 11.5pc is mainly driven by expectations that the headline inflation will remain above its medium-term target range of 5-7pc well into the next fiscal year. This suggests that the current episode is not a temporary spike but the beginning of a more persistent inflationary cycle. For most, this means an erosion of living standards. Transport inflation raises the cost of commuting and goods distribution, feeding into broader price increases, while food inflation hits hardest where income elasticity is lowest, that is, among households already allocating a large share of earnings to basic consumption. For low- and middle-income households, already stretched by successive economic shocks, the return of double-digit inflation signifies not just a loss of purchasing power, but also a renewed struggle to maintain even basic standards of living. For policymakers, the task is not just to bring inflation under control, but also to deal with how its impact is unevenly felt across different income groups. Without relief for vulnerable groups, the macroeconomic adjustment risks deepening inequality and social stress.

Published in Dawn, May 3rd, 2026