ISLAMABAD: Pakistan’s headline inflation is projected to reach about 5.1 percent in September 2025, up from 3.0 percent in August, driven largely by a surge in food prices, brokerage firm Insight Securities said in a research note on Monday.

The estimate, compared with 6.9 percent in the same month last year, comes as Pakistan is pushing through a series of economic reforms under a $7 billion International Monetary Fund program, including a contractionary government budget passed in June that slashes spending to curb the fiscal deficit.

Inflation has fallen sharply from a record 37.97 percent in May 2023, when global commodity shocks, energy price hikes and currency depreciation sent prices soaring. By late 2024 and early 2025, headline inflation had fallen into single digits on monthly measures, aided by tight monetary policy, base effects and external stabilization efforts.

“Preserving macroeconomic stability and keeping the current account deficit within a manageable level of less than 1 percent of GDP is essential,” Insight Research said in a note on Monday.

“Although the evolving diplomatic landscape may provide a ramp for growth, the priority for now should be to consolidate stabilization before pursuing a growth path.”

Prices of key food staples rose sharply in September, with tomatoes surging 96.6 percent, wheat flour up 36.9 percent, onions climbing 34.2 percent, and fresh vegetables and potatoes gaining 5.6 and 5.4 percent, respectively. These increases pushed overall food inflation about 5.2 percent higher month-on-month. Prices of fresh fruits, chicken, and motor fuel fell, partially offsetting the impact.

The central bank is expected to keep interest rates unchanged at its next monetary policy meeting in October, as policymakers weigh the impact of earlier aggressive rate cuts that are still filtering into the real economy.

Insight noted that rising credit offtake and improvements in high-frequency indicators point to early signs of recovery, though flood-related disruptions, wheat prices rebounding from a low base, and higher import volumes pose upside risks to inflation in the coming months.

While initial data suggest the recent monsoon floods caused far less damage than the catastrophic 2022 disaster, policymakers remain cautious about their lingering economic effects.

Authorities have emphasized that continued fiscal discipline, a contained current account deficit and a stable macroeconomic environment are key to sustaining the disinflation trend and paving the way for growth once stabilization is firmly secured.