New Delhi, July 4 (IANS) Pakistan’s economy is under mounting pressure as inflation touched 11.7 per cent in May and economists warned the country risks slipping into a cycle of weak growth, rising prices and financial strain, a new report has said.
The report from Morocco-based media house Assahifa said that annual inflation in Pakistan rose to 11.7 per cent in May 2026, up from 10.9 per cent in April and 7.3 per cent in March. State Bank of Pakistan’s target range of inflation stands at 5 per cent to 7 per cent.
Economists attributed the rising inflation to a sharp rise in transport costs and perishable food prices, each up about 15 per cent, alongside a severe foreign‑exchange squeeze and a soaring oil import bill.
All these factors have eroded purchasing power and weighed heavily on economic activity, the report noted.
The US-Iran war had disrupted supply chains worldwide but Pakistan is more to external shocks because of its heavy dependence on imported energy and its fragile balance-of-payments position.
Pakistan’s central bank recently raised its policy rate by 100 basis points, to 11.50 per cent from 10.50 per cent, in an effort to rein in inflation but economists called the move “wrong medicine for the wrong diagnosis.”
The higher interest rates risk will slow down investment and could push the economy toward stagflation.
Experts argued that higher interest rates can help cool an economy when inflation is driven by excessive demand but Pakistan’s inflation stems from supply-side distortions.
On the supply side, analysts argued that preference for lending to the state over the private sector has emerged, as low confidence and uncertainty encourage commercial banks to invest in government securities rather than extend credit to businesses.
The report cited Prime Minister Shehbaz Sharif saying the country’s oil import bill had surged from $300 million to $800 million since the US-Iran conflict effectively “erasing all the economic progress the country had made over the past two years.”
—IANS
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