Inflation Rate in Pakistan 2023: The Record 38% Peak & Its Fallout
May 2023: Pakistan’s inflation hit 38% — the highest since 1965, the highest in South Asia, higher even than crisis-hit Sri Lanka. This guide reconstructs the record year: what drove prices to 38%, who was hurt most, and how the country climbed down.
Quick answer: Pakistan’s CPI hit a record 38% year-on-year in May 2023 (PBS) — the highest since July 1965. Food inflation reached 48%+ in cities and 52% in rural areas. FY2022-23 averaged 29.2%. Causes: IMF-mandated fiscal tightening, rupee collapse, and global commodity prices.
The 38% peak
The PBS reported CPI at 37.97% YoY in May 2023 (rounded to 38%), up from 36.4% in April — breaking the previous month’s record in turn. Month-on-month: +1.6%. Urban food inflation hit 48.1%; rural CPI hit 42.2%; the Sensitive Price Index reached 43%. Core inflation exceeded 23%. Pakistan’s 38% topped Sri Lanka’s 25.2% — the highest in South Asia (Reuters, June 2023).
What drove it
- IMF conditions: the government implemented painful fiscal adjustments — subsidy removals, tax hikes, energy tariff increases — to unlock stalled IMF funding.
- Rupee collapse: the rupee’s slide made every import — fuel, food, machinery — dearer.
- Global commodities: the aftershocks of the Ukraine war kept food and energy expensive.
- Political crisis: the May 9 unrest and institutional standoff froze decision-making and spooked markets.
Deeper analysis in our causes guide.
Who was hurt most
Rural households (42.2% CPI) and the urban poor, for whom food is most of the budget: with food inflation near 50%, the poorest quintiles faced effective inflation far above the headline. Real wages collapsed; savings evaporated. The human cost is documented in our effects guide.
The aftermath
The SBP hiked the policy rate to 22% in June 2023 — the highest ever. Base effects kicked in from June, and the long climb down began through 2024. But 2023’s lesson endures: with the rupee and energy prices, double-digit inflation is never far away — as 2026 is proving again.
Related Guides
2023: FAQs
What was Pakistan’s highest inflation rate?
38% year-on-year in May 2023 — the highest since 1965.
What was average inflation in FY2022-23?
29.2% — against 11.3% the previous year.
Why was inflation so high in 2023?
IMF-mandated fiscal tightening, rupee depreciation, global commodity prices and political turmoil.
How did the SBP respond in 2023?
It raised the policy rate to a record 22% in June 2023.
