Research · Working paper, 2026. Not peer reviewed.
Inflation and Corporate Profitability in Pakistan, FY2006–FY2025
How the profits of Pakistan's listed companies have moved with inflation over twenty years.
- 441
- listed firms
- 6,683
- firm-years
- 20
- fiscal years
- 14
- sectors
- 01 / 06
The question
Pakistan's inflation went from 2.9% in FY2016 to 29.2% in FY2023. I wanted to know what that did to company profits.
Tap or hover on the chart to read each year. Arrow keys work too.
CPI inflation, 12-month average over each fiscal year. Sources: IMF, Pakistan Bureau of Statistics.
Show the numbers
Year Inflation (%) FY06 7.9 FY07 7.8 FY08 12.0 FY09 19.6 FY10 10.1 FY11 13.7 FY12 11.0 FY13 7.4 FY14 8.6 FY15 4.5 FY16 2.9 FY17 4.2 FY18 3.9 FY19 7.3 FY20 11.7 FY21 8.9 FY22 12.2 FY23 29.2 FY24 23.4 FY25 4.5 - 02 / 06
The data
I built a panel from State Bank of Pakistan company accounts. 441 non-financial firms in 14 sectors, 6,683 firm-years, each matched to inflation over its own financial year.
Tap or hover on the chart to read each sector. Arrow keys work too.
6,683 firm-years in total. Source: SBP financial statements of PSX-listed non-financial firms, FY2006–FY2025.
Show the numbers
Sector Firm-years Textile 2,244 Chemicals, Chemical Products and Pharmaceuticals 760 Manufacturing 626 Sugar 561 Motor Vehicles, Trailers & Autoparts 394 Fuel and Energy 360 Food Products 341 Cement 340 Information and Communication Services 257 Coke and Refined Petroleum Products 198 Other Services Activities 165 Mineral products 161 Electrical Machinery and Apparatus 148 Paper, Paperboard and Products 128 - 03 / 06
Rupees vs real
Aggregate operating profit grew 6.4 times in rupees. Deflated by the CPI, it ended about 3% below its FY2006 level.
- In rupees (nominal)
- After inflation (real)
Tap or hover on the chart to read each year. Arrow keys work too.
Aggregate operating profit, chain-linked index, FY06 = 100. Source: SBP financial statements of 441 listed non-financial firms; real values deflated by the CPI.
Show the numbers
Year In rupees After inflation FY06 100.0 100.0 FY07 96.9 89.9 FY08 115.5 95.7 FY09 86.2 59.7 FY10 140.6 88.5 FY11 167.0 92.5 FY12 184.5 92.0 FY13 257.6 119.7 FY14 225.1 96.3 FY15 207.7 85.0 FY16 204.5 81.4 FY17 218.8 83.6 FY18 243.9 89.6 FY19 268.2 91.8 FY20 239.4 73.4 FY21 344.9 97.1 FY22 528.2 132.6 FY23 647.2 125.8 FY24 656.4 103.3 FY25 644.3 97.1 - 04 / 06
The 10% bend
Up to about 10% inflation, return on assets rises 0.48 points per point of inflation. Above it, the slope is flat. The bend holds for every threshold from 6% to 15%.
- Years below 10% inflation
- Years at or above 10%
Tap or hover on a dot to read it. Arrow keys work too.
Median return on assets of listed non-financial firms by fiscal year. Threshold model (firm fixed effects): +0.48 pp of ROA per point of inflation below 10%, −0.05 above.
Show the numbers
Threshold Slope below Slope above Change, bootstrap p 6% 1.25 0.04 0.004 8% 0.72 -0.01 0.001 10% 0.48 -0.05 0.006 12% 0.33 -0.07 0.014 15% 0.28 -0.15 0.015 - 05 / 06
Sectors
Sugar, mineral products, electrical machinery, fuel and energy, and chemicals show clearly positive slopes. Cement and autos show none.
- Clearly above zero (p < 0.05)
- Not clearly different from zero
Tap or hover on a row to read it. Arrow keys work too.
Change in ROA (percentage points) per point of inflation, by sector, with 95% intervals. Driscoll–Kraay standard errors.
Show the numbers
Sector Slope 95% interval p Sugar 0.392 0.18 to 0.60 0.0002 Mineral products 0.280 0.10 to 0.46 0.0023 Electrical Machinery and Apparatus 0.274 0.09 to 0.45 0.0028 Fuel and Energy 0.250 0.02 to 0.48 0.0331 Chemicals, Chemical Products and Pharmaceuticals 0.202 0.06 to 0.35 0.0062 Information and Communication Services 0.158 -0.07 to 0.39 0.1746 Textile 0.157 -0.06 to 0.38 0.1639 Other Services Activities 0.137 -0.09 to 0.36 0.2362 Manufacturing 0.136 -0.04 to 0.31 0.1231 Food Products 0.130 -0.07 to 0.33 0.2065 Paper, Paperboard and Products 0.059 -0.22 to 0.34 0.6780 Coke and Refined Petroleum Products 0.019 -0.21 to 0.25 0.8693 Motor Vehicles, Trailers & Autoparts -0.120 -0.36 to 0.12 0.3341 Cement -0.139 -0.60 to 0.32 0.5518 - 06 / 06
The trap
With ordinary firm-clustered errors, the average effect looks highly significant. Errors that allow for shocks hitting every firm at once say it isn't.
Same estimate in every row: +0.14 pp of ROA per point of inflation.
Model 1: ROA on inflation with firm fixed effects and macro controls (6,683 firm-years). Only the standard errors change between rows.
Show the numbers
Method p-value Firm-clustered errors 0.0002 Driscoll–Kraay errors 0.0921 Wild cluster bootstrap 0.2738
Tap or hover on the chart to read each year. Arrow keys work too.
CPI inflation, 12-month average over each fiscal year. Sources: IMF, Pakistan Bureau of Statistics.
Show the numbers
| Year | Inflation (%) |
|---|---|
| FY06 | 7.9 |
| FY07 | 7.8 |
| FY08 | 12.0 |
| FY09 | 19.6 |
| FY10 | 10.1 |
| FY11 | 13.7 |
| FY12 | 11.0 |
| FY13 | 7.4 |
| FY14 | 8.6 |
| FY15 | 4.5 |
| FY16 | 2.9 |
| FY17 | 4.2 |
| FY18 | 3.9 |
| FY19 | 7.3 |
| FY20 | 11.7 |
| FY21 | 8.9 |
| FY22 | 12.2 |
| FY23 | 29.2 |
| FY24 | 23.4 |
| FY25 | 4.5 |
Tap or hover on the chart to read each sector. Arrow keys work too.
6,683 firm-years in total. Source: SBP financial statements of PSX-listed non-financial firms, FY2006–FY2025.
Show the numbers
| Sector | Firm-years |
|---|---|
| Textile | 2,244 |
| Chemicals, Chemical Products and Pharmaceuticals | 760 |
| Manufacturing | 626 |
| Sugar | 561 |
| Motor Vehicles, Trailers & Autoparts | 394 |
| Fuel and Energy | 360 |
| Food Products | 341 |
| Cement | 340 |
| Information and Communication Services | 257 |
| Coke and Refined Petroleum Products | 198 |
| Other Services Activities | 165 |
| Mineral products | 161 |
| Electrical Machinery and Apparatus | 148 |
| Paper, Paperboard and Products | 128 |
- In rupees (nominal)
- After inflation (real)
Tap or hover on the chart to read each year. Arrow keys work too.
Aggregate operating profit, chain-linked index, FY06 = 100. Source: SBP financial statements of 441 listed non-financial firms; real values deflated by the CPI.
Show the numbers
| Year | In rupees | After inflation |
|---|---|---|
| FY06 | 100.0 | 100.0 |
| FY07 | 96.9 | 89.9 |
| FY08 | 115.5 | 95.7 |
| FY09 | 86.2 | 59.7 |
| FY10 | 140.6 | 88.5 |
| FY11 | 167.0 | 92.5 |
| FY12 | 184.5 | 92.0 |
| FY13 | 257.6 | 119.7 |
| FY14 | 225.1 | 96.3 |
| FY15 | 207.7 | 85.0 |
| FY16 | 204.5 | 81.4 |
| FY17 | 218.8 | 83.6 |
| FY18 | 243.9 | 89.6 |
| FY19 | 268.2 | 91.8 |
| FY20 | 239.4 | 73.4 |
| FY21 | 344.9 | 97.1 |
| FY22 | 528.2 | 132.6 |
| FY23 | 647.2 | 125.8 |
| FY24 | 656.4 | 103.3 |
| FY25 | 644.3 | 97.1 |
- Years below 10% inflation
- Years at or above 10%
Tap or hover on a dot to read it. Arrow keys work too.
Median return on assets of listed non-financial firms by fiscal year. Threshold model (firm fixed effects): +0.48 pp of ROA per point of inflation below 10%, −0.05 above.
Show the numbers
| Threshold | Slope below | Slope above | Change, bootstrap p |
|---|---|---|---|
| 6% | 1.25 | 0.04 | 0.004 |
| 8% | 0.72 | -0.01 | 0.001 |
| 10% | 0.48 | -0.05 | 0.006 |
| 12% | 0.33 | -0.07 | 0.014 |
| 15% | 0.28 | -0.15 | 0.015 |
- Clearly above zero (p < 0.05)
- Not clearly different from zero
Tap or hover on a row to read it. Arrow keys work too.
Change in ROA (percentage points) per point of inflation, by sector, with 95% intervals. Driscoll–Kraay standard errors.
Show the numbers
| Sector | Slope | 95% interval | p |
|---|---|---|---|
| Sugar | 0.392 | 0.18 to 0.60 | 0.0002 |
| Mineral products | 0.280 | 0.10 to 0.46 | 0.0023 |
| Electrical Machinery and Apparatus | 0.274 | 0.09 to 0.45 | 0.0028 |
| Fuel and Energy | 0.250 | 0.02 to 0.48 | 0.0331 |
| Chemicals, Chemical Products and Pharmaceuticals | 0.202 | 0.06 to 0.35 | 0.0062 |
| Information and Communication Services | 0.158 | -0.07 to 0.39 | 0.1746 |
| Textile | 0.157 | -0.06 to 0.38 | 0.1639 |
| Other Services Activities | 0.137 | -0.09 to 0.36 | 0.2362 |
| Manufacturing | 0.136 | -0.04 to 0.31 | 0.1231 |
| Food Products | 0.130 | -0.07 to 0.33 | 0.2065 |
| Paper, Paperboard and Products | 0.059 | -0.22 to 0.34 | 0.6780 |
| Coke and Refined Petroleum Products | 0.019 | -0.21 to 0.25 | 0.8693 |
| Motor Vehicles, Trailers & Autoparts | -0.120 | -0.36 to 0.12 | 0.3341 |
| Cement | -0.139 | -0.60 to 0.32 | 0.5518 |
Same estimate in every row: +0.14 pp of ROA per point of inflation.
Model 1: ROA on inflation with firm fixed effects and macro controls (6,683 firm-years). Only the standard errors change between rows.
Show the numbers
| Method | p-value |
|---|---|
| Firm-clustered errors | 0.0002 |
| Driscoll–Kraay errors | 0.0921 |
| Wild cluster bootstrap | 0.2738 |
What it means
- Judge performance in inflationary years by real profits, not only by nominal ratios.
- Exposure to inflation is mostly a sector question.
- Above roughly 10% inflation, measured profitability stopped improving.
These are associations from observational data, over twenty years with two big inflation episodes. Accounting changes and the use of the CPI rather than producer prices are documented limits.
What I did
- Harmonised three State Bank of Pakistan Excel releases with different layouts and year conventions into one firm-year panel
- Matched company accounts to monthly IMF CPI data using each firm's own year-end month
- Panel econometrics in Python: fixed effects, Driscoll–Kraay standard errors, wild cluster bootstrap, a threshold model and sector-specific slopes
- Wrote a 21-page working paper, a technical report, an executive summary and an 11-slide deck
- Kept the whole pipeline reproducible from raw data with one command (uv, Python 3.15)
It started as a Stata project at university in 2025. In 2026 I rebuilt it in Python with twenty years of data.
Want the full paper?
Inflation and the Profitability of Listed Non-Financial Firms in Pakistan: Firm-Level Panel Evidence, FY2006–FY2025. Working paper, 2026. Not peer reviewed.