Govt projects inflation surge to be 7.5% in FY26

ISLAMABAD: The government has projected a rebound in inflationary pressures, envisaging a CPI-based average inflation rate of up to 7.5 per cent in the upcoming budget 2025-26, compared to 5pc in the outgoing fiscal year.

The planning ministry also warned that the external sector might face pressure, as easing import controls and debt repayments were likely to widen the current account deficit in the next budget.

The Annual Plan Coordination Committee (APCC), scheduled to meet on June 2, 2025 is all set to consider recommending the overall macroeconomic framework for the upcoming budget, including envisaging GDP growth rate of 4.2pc for the next budget against 2.68pc for the outgoing financial year.

These macroeconomic projections show that the stabilisation mode would continue in the coming fiscal year under the tight noose of the IMF.

According to the government’s prescriptions, public investment is projected to increase from 2.9pc to 3.2pc, similarly, private investment is also projected to rise from 9.1pc of GDP to 9.8pc.

“The fiscal and monetary policies will aim for consolidation and stability, with an expected inflation of 7.5pc due to the low base effect and risk of ongoing trade tensions and domestic tariff rationalisation measures. The external sector may face pressure, as easing import controls and debt repayments are likely to widen the current account deficit. Yet, strong remittances, export recovery, and anticipated external financing are expected to cushion these pressures and support external sustainability,” the government concedes.

The impact of the base effect for keeping inflation on the lower side is going to vanish from the upcoming fiscal year, elevating the CPI-based average inflation picking up and standing at 7.5pc in 2025-26.

This indicates that the inflation is going to persist in the next fiscal year from July 2025 to June 2026 but within the single digit. On monthly basis, it might be doubled digit in some instances.