Ramadan in Pakistan has always been linked with a unique phenomenon of price hikes that can directly affect millions of citizens nationwide. While the situation has improved, the Ministry of Finance expects inflation to steadily rise from 2-3% in February to 3-4% in March 2025 due to Ramadan-induced price movements.
The relationship between Ramadan and inflation surges has been a consistent economic phenomenon in Pakistan, with an evident trend over multiple years. The month of Ramadan 2020 saw the inflation of Pakistan rise to 14.56%, putting enormous stresses and strains at a time when the citizens were already suffering from the burdens of lockdowns and unemployment due to COVID-191. Such behavior hardly happened in the other part of 2023 but became far more pronounced as client price inflation soared to 31.5% around Ramadan, with a few forecasts thinking it might attain 33%. It was an era of massive economic turmoil, with poor Pakistanis flocking to wheat distribution centers and most of the working-class folks forced to either pay inflated prices for basic needs or stand in queues for government handouts.
The fact that this inflation occurs yearly during Ramadan in Pakistan points more toward systematic economic factors than an isolated incident. Historical data proves this is not a new tendency but an aged economic trend that has attained normalization in the Pakistani economy. Ramadan inflation has limited severity across years, but 2023 is a particularly severe crisis level. Towards the latter months of the previous year, Pakistan witnessed the highest headline inflation levels in May 2023, against which inflation peaked at 38%, forming a difficult economic backdrop.
Pakistan's inflation profile at the start of Ramadan 2025 is a massive upgrade from its previous level. Such an incredible recovery indicates the impact of fiscal and monetary policies over the last 12 months. The State Bank of Pakistan (SBP) entered an aggressive monetary easing cycle and has cut the policy rate by a cumulative 1000 bp since June 2024; after the latest 100 bp cut in January 2025, the rate was at 12%.
Ramadan inflation in Pakistan is fundamentally attributable to the concepts of demand-supply. In the holy month of Ramadan, there are specific food items and kinds of fruit whose demand increases, most of which are consumed during suhoor (the meal eaten just before dawn) and iftar (the meal eaten by Muslims upon the arrival of the evening adhan to break their fast). Due to the religious significance of Ramadan, many middle- and lower-middle-class consumers buy these items daily during the time of Ramadan, even if they cannot afford them for the rest of the year. This change in behavior results in a significant spike in demand, 30-40% higher than usual, whereas the supply is fairly inelastic in the short run.
In a more advanced world, all such logistics would be served by well-oiled and regulated supply chain mechanisms that can easily do the same from baseline to a higher supply state. However, Pakistan is not like that. Its food distribution networks are often stiff and less capable of scaling up near predictable surges in demand, which is common as we are a seasonal economy producing certain foods in certain months.
The practice of hoarding basic goods to create an artificial shortage and hike prices before Ramadan has been documented over several years. In the weeks preceding Ramadan, some businesses purposely limit the market supply and release their stockpiles later at much higher rates. Such strategies are more effective as Ramadan carries both religious and emotional significance, resulting in lower price sensitivity and willingness to pay the premium prices to satisfy religious requirements and to sustain traditions.
The inflation spike brought by Ramadan has an enormous effect on poorer families, who spend a high share of their expenditure on food and essentials. In another matter, Ramadan 2023 was when the burden reached its boiling point after several people died in overcrowded flour distribution centers amid a spiraling inflation crisis in the month, with individuals fighting desperate wars to obtain affordable food to place in their stomachs. Although the Ramadan 2025 outlook is less alarming — amid a general decrease in inflation — sectors of the population most susceptible to economic alienation and food shortages will still be vulnerable.
With an eye on the potential for prices to rise during Ramadan 2025, the Economic Coordination Committee of the Cabinet has already taken preemptive measures and directed relevant ministries to work with the National Price Monitoring Committee to keep the strategic reserves of wheat, sugar, and pulses in place and enhance supply chains of essential items in advance of Ramadan. It is a relatively more structured effort to address the underlying inflation aspects of Ramadan instead of simply employing knee-jerk price-controlling measures.
The monetary easing cycle is still intact; the State Bank of Pakistan cut the policy rate of 100 pb to 12% in Jan 2025. Although they are not explicitly addressed to mitigate inflation during Ramadan, the general monetary policy approach is intended to assist economic recovery in the context of price stability. According to SBP, its ultimate objective remains to maintain inflation under the 5-7% band in the medium term. Both these things cannot be the same, and one of the key observations from the Google search results says that inflation does not rise during religious holidays. It becomes evident that it is directly instructive if, for instance, we compare it with Western countries, in which the prices of certain goods remain unchanged or if the prices of certain goods do not rise to a high level during the Ramadan feast.
It could also bolster competition policy to restrict such behavior in the market so that it does not resort to market capture apart from spending on enhancing agricultural productivity for better domestic food security. These reforms would address Ramadan inflation at its roots instead of alleviating its manifestations. Recently, the characteristic of an increase in inflation in Pakistan during the holy month of Ramadan has been observed as an effect of a multiplicity of economic, social, and structural factors. Ramadan 2025 will likely remain no exception to this historical norm, although with a much lower degree of intensity amid Pakistan's broadly improving inflation environment.
Tackling, while also taking advantage of, the seasonal inflation trends is certainly a challenge as Pakistan heads towards economic recovery with the help of the IMF program. Containing Ramadan inflation will not only offer a reprieve to consumers but will also bind Pakistan's overall economic reforms to higher degrees of success. Yet if proactive government planning, better supply chain management, effective regional trade, and prudent monetary policy come together, what has hitherto been an economic burden can become a celebration, bringing to the faith what a celebration is supposed to offer but without the excessive financial burden on citizens of Pakistan.
