Food prices may rise due to crop damage in flood-hit areas, says Finance Ministry.
Inflation fell to 3 percent in August 2025, the lowest level in the past two months. According to the Pakistan Bureau of Statistics, the main reason for this decline is a decline of about 25 percent in the prices of perishable food items in rural and urban areas.
The Finance Ministry had forecast inflation for August at 4 to 5 percent, while the actual rate was much lower. However, the ministry warned that food prices could rise again due to crop damage in agricultural areas affected by floods.
The inflation figures come at a time when the next meeting of the State Bank's Monetary Policy Committee is expected in two weeks, during which the monetary policy rate for the coming months will be determined. The interest rate is currently 11 percent, which is 7 percent higher than the current inflation rate.
Critics say that only commercial banks benefit from high interest rates, while the government is forced to spend half of its budget on interest payments.
Experts say that given the current economic situation, flood disasters and weak tax collection, the State Bank of India should cut interest rates to single digits. In August, the FBR collected 1.66 trillion rupees, which is 40 billion rupees less than the target. The low tax collection through electricity bills is a sign that domestic industry and consumers are moving away from the national grid towards other sources.
On the other hand, State Bank Executive Director Amin Lodhi told the parliamentary committee that the annual inflation target of 7 percent can only be achieved if interest rates are maintained at the current level. If interest rates are reduced, inflation is likely to rise further.
The central bank also included a possible increase in gas prices in July and next February in the analysis. According to the report, core inflation in urban areas reached 6.9 percent and 7.8 percent in rural areas, inflation in urban areas was 3.4 percent and 2.4 percent in rural areas, while food inflation was recorded as 2.2 percent in urban areas and 1.5 percent in rural areas.
However, sugar prices are still showing an annual increase of 26 percent, mainly due to the government's permission to export 765,000 metric tons of sugar.
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