Karachi, March 14, 2026 – Pakistan’s inflation outlook could face renewed pressure if global oil prices remain above $100 per barrel, according to a research analysis by Topline Securities Limited, which assessed how rising energy costs may impact the country’s inflation trajectory and monetary policy stance.
The report evaluates the sensitivity of Pakistan’s headline inflation to changes in fuel prices, transport fares, LPG, gas tariffs, electricity costs, and food prices using historical trends and economic assumptions.
Inflation Forecast for Next Four Quarters
Topline Securities estimates that if Brent crude oil averages around $100 per barrel, Pakistan’s inflation could follow this path:
• 4QFY26: 10.92%
• 1QFY27: 9.33%
• 2QFY27: 7.47%
• 3QFY27: 8.22%
The projections assume that for every $10 per barrel increase in oil prices, petrol and diesel prices could rise by around 5.5%, while transport service costs may increase by 3.5%. Gas prices are assumed to rise by 10% semi-annually, and electricity tariffs could increase by 3%. Food prices are projected to rise at roughly one-fifth of the transport sector increase, reflecting indirect cost pressures.
Interest Rate Outlook
Analysts note that Pakistan’s interest rate trajectory does not depend solely on inflation. Factors such as external account stability, economic growth, and fiscal conditions also play key roles.
Currently, Pakistan’s external position appears relatively stable, supported by foreign exchange reserves of around $16.4 billion, controlled current account deficit expectations of below 0.5% of GDP, and annual remittances exceeding $40 billion. However, the outlook remains vulnerable as more than half of Pakistan’s remittances originate from Gulf countries, which could be affected by geopolitical tensions.
March 2026 Inflation Expectations
Pakistan’s Consumer Price Index (CPI) for March 2026 is projected to rise 7–7.5% year-on-year, compared with 6.99% in February 2026, marking the highest monthly inflation in about 19 months.
On a month-on-month basis, inflation is expected to increase 1.1%, despite a 1.29% decline in food prices. The unusual drop in food inflation during Ramadan was driven by sharp price decreases in tomatoes (-36.7%), eggs (-21.7%), potatoes (-19.4%), and wheat (-5%). However, chicken and meat prices are expected to rise by 6.7% and 2.24%, respectively.
Transport and Energy Costs Drive Inflation
The transport sector is expected to contribute the most to inflation, with prices projected to increase 18% month-on-month due to higher global oil prices and geopolitical tensions in the Middle East. Petrol prices are estimated to have increased 26.7%, while high-speed diesel (HSD) rose 25%.
Meanwhile, the housing, water, electricity, and gas category is expected to increase 1.08% month-on-month in March 2026. Electricity tariffs may rise 3.27% due to Quarterly Tariff Adjustments (QTA) and Fuel Charges Adjustments (FCA). LPG prices are also expected to increase 5.63%, with firewood prices rising about 2%.
Possible Interest Rate Pressure Ahead
With inflation projected at 7–7.5% in March 2026, Pakistan’s real interest rate could climb to 300–350 basis points, above the historical average of 200–300 basis points.
Analysts believe that if oil prices sustain at $120 per barrel or higher, the State Bank of Pakistan may need to consider interest rate hikes to prevent real rates from turning negative and to maintain macroeconomic stability.
The inflation outlook therefore remains closely tied to global energy prices and geopolitical developments, making oil market trends a key factor for Pakistan’s economic and monetary policy decisions in the coming months.