PESHAWAR – Rising inflation, unemployment and mounting household expenses have intensified economic hardships across Khyber Pakhtunkhwa, while terrorism, disruption of business activities, closure of the Pak Afghan border and political differences between the federal and provincial governments have added further pressure on the province’s already fragile economic situation.
According to a survey report on inflation compiled by the Institute of Regional Studies (IRS), 89 percent of households in Peshawar are relying on loans to meet their daily expenses, while 95.1 percent of families are finding repayment of their debts difficult, highlighting the growing financial pressure on middle- and low income households.The survey was based on information collected from 462 households in Peshawar, along with focus group discussions and consultations with various stakeholders.
According to the report, prices of various essential commodities and services have increased by between 35 and 40 percent, while 48.7 percent of households in low income areas described themselves as being extremely affected by inflation.The survey found that 67.3 percent of households reported that although their incomes had increased, their expenditures had risen significantly more.As many as 93 percent of households reported higher electricity, gas and fuel expenses, while 86.4 percent said their food expenditures had also increased.The impact of inflation has forced a large number of families to shift towards cheaper and relatively lower-cost food items, while rising healthcare expenses have further complicated household finances.According to the survey, 79.4 percent of households said they could not afford medical treatment expenses.
Education has also come under pressure as a result of rising costs.The survey showed that 59.1 percent of households had delayed payment of school fees, while 19.2 percent had shifted their children from expensive schools to institutions charging comparatively lower fees.The increase in petroleum prices has affected not only household budgets but also transportation and mobility.According to the survey, petroleum prices have risen by around 50 percent since February 2026, resulting in higher transportation costs for 84.6 percent of households.The report said expensive transportation had compelled 79.8 percent of households to reduce trips to markets, 51.6 percent to cut travel related to educational activities, 49.2 percent to reduce journeys associated with employment and 37.7 percent to reduce travel for medical needs.The economic situation in Khyber Pakhtunkhwa, however, cannot be viewed solely through the lens of inflation, as the people of the province are simultaneously facing several economic and social pressures.
Terrorism and law and order problems have affected business activities, investment and employment opportunities, while unemployment and rising living costs have reduced the purchasing power of ordinary citizens.When household income remains limited, employment opportunities become uncertain and the costs of food, electricity, gas, fuel, education and healthcare continue to rise, maintaining a balanced household budget becomes increasingly difficult.In such circumstances, families initially use their savings and reduce expenditures, but eventually become dependent on borrowing to meet basic needs.The 89 percent debt ratio recorded among surveyed Peshawar households reflects the severity of this financial pressure, while the fact that 95.1 percent are struggling to repay their loans indicates that the problem extends beyond borrowing itself to the declining capacity of households to service their debts.
The closure of the Pak Afghan border has also created additional economic pressure in Khyber Pakhtunkhwa. In the province’s border districts, a large number of farmers, landowners, commission agents, transporters, labourers and small traders depend directly or indirectly on cross-border trade and the movement of agricultural produce.Prolonged closure of border crossings has disrupted the transportation of fruits, vegetables and other agricultural commodities to Afghanistan, causing financial losses to farmers and growers.When harvested crops cannot reach markets in time, their prices, sales and ultimately farmers’ incomes are directly affected.The disruption does not remain confined to farmers. Commission agents, loaders, transporters, labourers, warehouses and other people associated with border markets and agricultural supply chains are also affected when the movement of commodities is interrupted.
Similarly, a decline in Pakistan Afghanistan trade has placed pressure on employment linked to transportation, clearing agencies, cargo handling, warehouses, markets and small businesses.Reduced commercial activity along the border can therefore further complicate an already difficult employment situation in the province.Analysts say the economic challenges confronting Khyber Pakhtunkhwa are not the result of a single factor.Inflation, unemployment, insecurity, declining business activity, disruption of cross-border trade, high energy costs and political and financial differences are interacting with one another and multiplying their impact on ordinary households.The political differences between the federal and Khyber Pakhtunkhwa governments have also emerged as an additional challenge.Analysts point out that when differences between the federation and the province extend to financial resources, development funds, outstanding dues, energy and other administrative matters, they can indirectly affect development activities and economic planning.
The Peshawar survey indicates that inflation is no longer confined to rising food prices but is affecting healthcare, education, employment, transportation and household financial management.Analysts believe that economic recovery in Khyber Pakhtunkhwa would require more than simply bringing down prices.They point to the need for creating new employment opportunities, protecting small and medium sized businesses, ensuring access to markets for agricultural produce, restoring secure and sustainable cross border trade and creating an environment conducive to investment.They also maintain that in a province affected by terrorism, continuity of economic activity is directly linked to peace and security. If businesses, trade and transportation of agricultural produce remain disrupted, employment opportunities will remain limited and pressure on household incomes will continue.
The situation has consequently placed the people of Khyber Pakhtunkhwa under simultaneous pressure from terrorism, unemployment, inflation, business difficulties and disruption of cross border trade.The finding that 89 percent of surveyed Peshawar households are in debt provides a significant indication of the wider economic strain being experienced by ordinary families.Analysts say meaningful economic relief for the people of the province would require sustained and workable opportunities for employment, trade, agriculture and business alongside improvements in law and order, so that economic activity can continue and household incomes can gradually recover.