Pakistan’s annual inflation, as measured by the weekly Sensitive Price Indicator, rose to 11.85% in the week ended October 22, even as the country’s two biggest multilateral lenders praised its economic stabilisation and urged it to move on to growth. The numbers capture a gap that is becoming hard to ignore: macroeconomic indicators are improving, while the prices households pay for gas, food and fuel remain well above where they were a year ago.

According to the Pakistan Bureau of Statistics, the SPI rose 0.65% during the week, reversing a 0.04% decline the week before, and the year-on-year rate climbed from 11.38%. The index, which tracks 51 essential items across 50 markets in 17 cities, stood at 374.84, compared with 372.43 a week earlier and 335.14 a year ago. Liquefied petroleum gas led the weekly increases, jumping 22.44%, with the average 11.67-kilogram cylinder rising from Rs5,154.16 to Rs6,310.76. Live chicken rose 12.20% to Rs444.27 per kilogram, onions climbed 4.19%, plain bread 1.66% and wheat flour 1%. Some items offered relief, with tomatoes falling nearly 22%, petrol dropping 3.63% and diesel easing 1.68%.

The yearly picture is harsher. LPG is up 107% compared with a year ago, onions are up 73%, electricity charges for the first quarter are up nearly 59%, petrol is up 44%, diesel is up 42%, chicken is up 39% and wheat flour is up 36%. These are the items that fill a household’s monthly budget, and the highest-expenditure group recorded the sharpest weekly rise at 0.74%. The pattern shows how global energy shocks, which have followed the conflict in the Middle East, have fed through into everyday costs even as petrol prices have come down in recent weeks. One report on Friday also said LPG prices could fall by Rs30 to Rs40 as Iranian supplies resume, which would offer some relief if it materialises.

Against this backdrop, the tone of the international institutions has been notably positive about the stabilisation effort, while also asking for more. At a tax reform workshop in Islamabad on October 20, IMF Middle East and Central Asia Department Director Jihad Azour said Pakistan had made important progress in rebuilding confidence and strengthening its external buffers, but that fiscal policy must do more than meet primary balance targets and protect debt sustainability. He called for a broader, fairer and more predictable tax system, and urged the country to bring under-taxed sectors into the net and rationalise concessions. He also warned that exposure to higher energy and food prices, trade disruption and tighter global financing conditions raised the stakes for preserving stability while supporting recovery. Finance Minister Muhammad Aurangzeb agreed that tax policy should be guided by economic considerations rather than designed only to meet revenue targets.

Two days later, the World Bank released its Pakistan Development Update, titled “Attaining Escape Velocity,” which said faster structural reforms could triple Pakistani incomes by 2050 but that current growth is not enough. The Bank estimates growth at 3.7% in the last fiscal year and projects 3.8% this year, but real per capita growth remains stuck at around 1.6%. The report noted that Pakistan created 17.7 million net new jobs between 2018 and 2024, but most of them were in low-paying, low-productivity sectors, and it estimates that around 3.6 million young people enter the labour market each year. Labour productivity growth averaged just 0.4% a year between 2014 and 2024. The Bank also said poverty has risen amid high inflation and slow productivity, a figure reported by Samaa as 29%. World Bank Country Director Bolormaa Amgaabazar said Pakistan had made real progress in restoring stability and that markets have taken notice, but that reforms to drive faster growth were now urgently needed.

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On Friday, a World Bank delegation led by Regional Director Sandeep Mahajan met Aurangzeb and urged Pakistan to use its stability as a platform for investment-led growth, with talks covering private investment, infrastructure financing, regulation, privatisation and job creation. Aurangzeb cited the recent $3 billion Eurobond issuance as evidence that Pakistan has regained access to international markets. A commentary in Pakistan Today observed that the World Bank’s emphasis on moving to growth appears to contrast with the IMF’s message that stability must first be secured, though both institutions have in fact said that stability is a precondition rather than a destination.

There is a tension here that policymakers will have to manage. Stability has meant tight fiscal and monetary policy, and the IMF has pushed for limited, targeted and time-bound fuel support, rather than broad subsidies. The State Bank of Pakistan’s monetary policy committee meets today, and analysts are split between holding the policy rate at 11.5% and raising it by up to 100 basis points if fuel prices stay high, according to one report. The same report said the IMF has forecast average inflation of 9.9% for the year and noted that Pakistan’s inflation had risen more sharply than that of almost any other oil-importing economy in the region. A tighter stance would help contain prices but could slow growth and make job creation harder, which is precisely the problem the World Bank is warning about.

The result is a policy puzzle without an easy answer. The lenders want Pakistan to widen the tax base, reduce distortions and attract private investment, steps that take years to deliver. Households, meanwhile, are measuring the economy by the cylinder, the chicken and the electricity bill, and those measures have moved the wrong way over the past twelve months. The October inflation figure, due in early November, will show whether falling petrol prices are starting to ease the pressure on food, or whether gas, diesel and electricity keep driving prices higher.

If stability has been achieved, as the IMF, the World Bank and the government all say, the next question is how long households can be expected to wait for it to show up in their own budgets, and what happens to public patience if it does not.

Compiled by the Weekly PK Business Desk.