https://arab.news/cda73
- Consumer prices rise 11.7 percent annually, up from 10.9 percent in April, Bureau of Statistics says
- Benchmark KSE-100 index falls nearly 2 percent as investors weigh inflation, Middle East tensions
ISLAMABAD: Pakistan’s annual inflation rate accelerated in May, official data showed on Monday, while stocks fell nearly 2 percent as investors grappled with rising global oil prices, renewed inflation concerns and uncertainty ahead of this week’s federal budget.
The inflation reading comes days before Pakistan unveils its budget for the fiscal year beginning July 1, with policymakers seeking to maintain economic stability under a $7 billion International Monetary Fund (IMF) program approved in September 2024 while also facing calls from businesses and households for tax relief.
Pakistan, which imports a large share of its energy needs, is also vulnerable to swings in global oil prices. Investors have become increasingly cautious as escalating tensions in the Middle East raise concerns about higher import costs, inflationary pressures and strain on the country’s external accounts.
According to the Pakistan Bureau of Statistics, Pakistan’s headline inflation reached 11.7 percent year-on-year in May 2026, accelerating from 10.9 percent in April. This marks the highest reading in nearly two years, driven largely by rising global energy import costs following the Middle East conflict. On a month-on-month basis, prices increased by 0.5 percent.
“Elevated oil prices revived concerns over inflation and external account pressures, dampening investor confidence and triggering broad-based selling across key sectors,” brokerage house Topline Securities said in a market review.
The benchmark KSE-100 index closed at 170,600 points, down 3,362 points, or 1.93 percent, after touching an intraday low of 3,565 points during the session.
Topline said the market remained under sustained selling pressure throughout the day as international oil prices rose amid escalating conflict between Israel and Lebanon, reviving concerns about inflation and Pakistan’s balance of payments outlook.
“The negative momentum was primarily driven by a surge in international oil prices amid rising geopolitical tensions in the Middle East,” the brokerage said.
The bearish sentiment was led by heavyweight stocks including Engro Holdings, Fauji Fertilizer Company, Lucky Cement, Hub Power Company and Oil & Gas Development Company, which collectively erased 1,464 points from the benchmark index, according to the report.
Market activity remained relatively robust despite the selloff, with total traded volume reaching 590 million shares and turnover standing at 31.98 billion rupees ($114.8 million). DCL was the most actively traded stock, with 43 million shares changing hands.
Pakistan has made significant progress in reducing inflation since the economic crisis that pushed consumer price growth above 30 percent in 2023, when soaring food and fuel prices, a weakening currency and dwindling foreign exchange reserves squeezed households and businesses.
The IMF-backed stabilization program helped restore foreign exchange reserves, ease pressure on the rupee and improve broader macroeconomic indicators. However, economists have warned that higher global commodity prices, particularly oil, could complicate the inflation outlook and narrow the government’s room for maneuver as it prepares the FY27 budget.
Finance Minister Muhammad Aurangzeb is expected to present the federal budget later this week, outlining the government’s plans for revenue collection, spending and economic growth in the coming fiscal year.